A large percentage of estate plans fail to achieve one or more of their goals, and many of them fail for a surprising reason. In past visits we discussed the ways trustees, heirs, changed circumstances, and new laws upend estate plans. What we have not discussed is the most surprising and perhaps most frequent reason estate plans fail: The estate owners do not implement their plans.
The failure to implement an estate plan is surprising. Having an estate plan created can be expensive and time consuming. Attorney’s fees and perhaps other costs are incurred whether or not the plan is implemented. In addition, those who undertake the Estate Planning process presumably did so because they understood why they need a plan and the consequences of not having an estate plan. Yet, after incurring the costs and knowing the consequences of not following through, many do not implement their plans.
It is unknown how many people fail to implement their plans, but many in the business believe it is a significant percentage of the plans created. The problem is so widespread that the magazine Private Wealth in 2003 and again in 2008 surveyed attorneys and high net worth individuals to study the problem from the perspective of both sides of the transaction. The magazine found consistent answers in its two surveys, and also found the situation is growing worse.
An estate plan is not implemented if the client fails to sign the wills and other documents. A failure to implement also occurs when assets are not transferred to living trusts or other entities or planned gifts are not made. Often documents are signed in the attorney’s office and transfers are made with the attorney’s help, but the attorney’s participation is not essential to implementation of all plans.
The interviews with attorneys revealed that most are unconcerned about their clients’ failures to implement the plans, and they acknowledge the failure is not unusual. Apparently the attorneys believe they have earned their fees from those clients and they are generating enough new business they do not worry about unsatisfied clients and unfinished plans. In addition, pressure from their partners to be profitable discourages attorneys from taking additional time to ask clients why they have not signed their documents or transferred assets to trusts.
The comments from high net worth clients who have not implemented plans are more interesting. These clients have net worths of at least $10 million.
Over 95% of the clients who did not implement plans said that the plans did not satisfy their goals, wants, and objectives. In addition, over 93% said the attorney made them “uneasy.” And 55% said their estate plans were too complicated.
All these complaints probably are the result of two problems: poor communication and a poor working relationship. They also provide clues to steps you can take to ensure having a successful estate plan you will implement.
Most clients know they need an estate plan and have general ideas why a plan is important. They want to avoid unnecessary taxes, high probate costs, and long delays. They also want to provide for loved ones. But they usually have only general goals. They are looking to the estate planner to help them refine their goals and define their needs. Most estate planners, on the other hand, seem to expect people to know what they want. Or the planners have put together a lot of estate plans and assume people generally want the same things and need similar plans.
Clients generally need an estate planner who will spend some time getting to know the scope of their families, their finances, and their general goals. Together they use that information to help formulate specific goals. Then, the estate plan can be developed.
The complaint that the plans are too complicated is telling. Remember these are high net worth individuals. They generally should be people who are familiar with finance and have at least dabbled in some complicated issues. They also should know that estate planning can be complicated, especially if tax reduction is important. Yet, their estate planners are unable to explain satisfactorily how the plans drafted would achieve their goals.
My guess is that many estate planners view themselves as technicians and perhaps assume a certain level of knowledge among their clients. They might do a poor job of communicating how a plan achieves a client’s goals because they assume knowledge by a client and use legal jargon. They also might not take the time to learn clients’ true goals. It can take a while for someone to open up with a stranger about the details of his or her family, finances, goals, and aspirations, and planners might not take the time. Perhaps, too, clients are intimidated by the situation and an attorney’s use of estate planning jargon. They don’t ask enough questions.
You can take steps to avoid being one of those clients who spends a lot of money to have an estate plan developed, and then does not implement the plan.
Ask friends and colleagues for referrals. Most estate planners are recommended through other professionals. The professionals know the estate planner is competent and can communicate with them. But they probably do not know how the planner communicates with clients. It might be better to get a referral from a satisfied client than from an attorney’s colleague.
Meet with several estate planners before making a commitment. The estate planner should know more than almost anyone else about you and your finances. If you are not comfortable sharing details with an estate planner and asking questions, it probably will not be a successful relationship.
Do a lot of preparatory work. Gather and organize information so the attorney can be presented with a clear picture of both your finances and family. Some estate planners have questionnaires or worksheets for clients to complete. If not offered one, ask for one and complete it thoroughly. This reduces the time the attorney spends gathering information and increases the time that can be spent getting to know you.
Do not be afraid to ask questions or for a better explanation. Part of the attorney’s job is to be sure you understand the plan and are comfortable with it. You should be sure the goals are understood and you know how the plan will meet them.
Keep in mind that it is your plan and your responsibility. The attorney is working for you. If there are things you are unsure of or do not understand, persist until the plan is clear.
The consequences of not having an estate plan in place can be disastrous for loved ones. Putting together an estate plan takes a lot of time and money. Do not waste those resources by having a plan that is not implemented.