Making money from estate planning

MAKING MONEY FROM ESTATE PLANNING“BURNING ISSUES”

Andrew AndreyevNovember 2012

What we will cover

www.adlaw.com.auAndreyev Doman Lawyers

Why should you be interested? What can you do? ‘The process’ Understanding the ‘key issues’ Segmenting clients and hitting the ‘hot

buttons’ Your role Getting client ‘buy-in’ The value to your practice.

What do we know about making money from estate planning?

Why all the interest? Intergenerational wealth transfer

Need to deal with the sophisticated structures

Increased awareness of what can go wrong

Growing demand for sophisticated outcomes

Highly competitive market for professional services

Self-generated ‘market’33% divorce50% re-marry600,000 family trusts458,000 SMSFs (trillions in super)

Million of companies60% of people don’t have Wills

The high-level stuff

What is Estate Planning? Protecting, passing on

and managing wealth: During your lifetime; When you die; and After you have died.

It is fundamentally about ‘wealth management’.

Why should you be interested? Estate Planning and

Business Succession come down to two things: Wealth

management Risk mitigation

It should be central to your practice

Quick self-assessment

Level of knowledge… What is your level of

knowledge? Basic understanding of

what it is about in broad terms

Good understanding of issues

Good understanding of solutions to issues

Level of activity… How much advice do you

actually give? Just ‘check the box’ each

year Talk about the issues with

clients Talk about potential

solutions with clients Regularly assist in the

implementation of solutions for clients

Frustrations… What is the most

frustrating aspect of your involvement? Lack of knowledge of

issues Lack of knowledge about

solutions Lack of client engagement

or interest Lack of good

complementary advisers No money/return for effort

What can you do?

What can you do?1. Identify a need2. Raise the relevant key

issues3. Document objectives4. Gather the relevant data5. Project manage the

documents

What you can’t (shouldn’t) do… www.adlaw.com.auAndreyev Doman Lawyers

Raising the key issues Moving from ‘theory’

and ‘talk’ to real ‘need’

The good news: You don’t need to know

all the answers The bad news:

You need to know about the key issues.

Documenting objectives Simple ‘plain English’

summary of what needs to be addressed

How good is the lawyer? Why your client should

not care

Gather the data

Be the central repository for data

Work constructively with others to fill in the gaps

Develop an ‘Estate Organiser’. Use Instruction Sheets. Include ‘soft’ data:

Objectives/Concerns Manage and control the

process.

‘Project manage’ the outcomes

Identify your value: Get appointed, Get paid

Remain in control of the process: Do not delegate, Get authority

Understand and manage pricing

Identify complementary experts

Develop ‘internal experts’ Stick to a simple timeline.

The detailed process Preparation

Understand the key issues Understand the client categories Segment your client base

Client engagement Raise the relevant key issues Document the concerns and objectives

Project manage the solutions Control the data Identify your team.

What are the key issues?

Solve relevant issues There are only a

limited number of issues

Every client has at least one burning issue

Your job is to match the client with their burning issue

Use examples.www.adlaw.com.auAndreyev Doman Lawyers

Identifying need for planning Will the telephone

company talk to you if your spouse is in a coma?

Do you want a say in which hospital your spouse goes to?

Do you want a say in who controls your asset if you die?

Do you want a say in where your assets end up when you die?

Do you want to avoid costly disputes?

Do you want to ensure the Government is not in control of your kid’s future?.

So you have an existing Will…

Superannuationsavings

DeceasedSurviving spouse

Family trusts

Investmentproperty

Companies

Business

Shares

Nominate "Estate"

"Joint"

Nominate "Estate"

Insurance Policy

Stocksand bonds

Buy-Sell Agreement

Binding Nomination "Trust Will"Nomination

Named policybeneficiary "Dependent" New "controller" of

trust or assets

Insurance Policy

Cashat bank

Investmentproperty

Personaleffects

Beneficiaries under Will/Testamentary trusts

Personal health and wellbeing Are you in good

health? Is your spouse in

good health? Will you have

adequate wealth to sustain you until you die?

Are you involved in any current or future activities that expose you to higher physical risk?

Do you want to transfer some wealth before you and your spouse die?.

Asset protection Pre-death structuring:

Are you concerned you may be sued before you die?

Do you want to leave someone out of your Will?

Are you concerned about someone challenging your Will, and changing who gets what?

Post death structuring: Do you want to protect

the assets you give your children from potential claims?

Are you worried that your children will get divorced and their partner will get a chunk of your Estate?

Are concerned that one or more of your children will waste their inheritance?.

Wealth preservation Are you concerned

that your spouse will remarry, and your assets will go to the new bloke or his kids?

Do you want to make sure your kids don’t end up spending your money on expensive drugs if you die early?

Do you want your spouse to preserve some assets for your children?

Do you want your children to preserve some assets for your grandchildren?

Do you want to fund your grandchildren’s education pre-tax?

Do you want to pay tax on your super, and CGT and stamp duty on your estate?

Do you want your Estate to remain intact and to benefit several future generations?.

Andreyev Doman Lawyers

“Family Wills”

“Control, without legal ownership”

Testamentary Trust

Deceased

Surviving spouse

DECEASED'S ESTATE

Assets

Child BChild A

Pre-taxincome

Estate administration Are your affairs in a

mess, and require sorting out?

Would you like to give your spouse/children very wide control and discretions over the family asset?

Do your spouse/children have the necessary expertise or interest to manage your estate?

Do not want your children, or grandchildren, to receive significant assets before they are old enough to make wise decisions?

Is it important for each beneficiary to be treated fairly?

Do you have a child who suffers from a disability and is not able to look after themselves?.

Deceased

Child A

$100,000 Property A

½ interest inProperty B

UltimateOwnership

(100%)

Child B

$100,000 Property B

UltimateOwnership

(100%)

$200,000 Property A Property B

½ interest inProperty A

$200,000Property A Property B

1/2 1/2 1/21/2

Capital Gains Tax and stamp duty

considerations

Child A

Testamentary Trust(Child A)

$100,000 Property A

Passes to relevantTrustees

Owns assetsChild B

Testamentary Trust(Child B)

$100,000 Property B

Owns assets

Exercise of discretion on asset division(among Nominated Beneficiaries, consistent with overall asset division)

Passes to relevantTrustees

Deceased$200,000 Property A Property B

Adjustments for ‘notional assets’

Adjustments to reduce tax

Adjustments for tax

Business interests How dependent is

your business on you? Who will look after

your business when you are gone?

Will your spouse understand and be able to deal with your business and investment structures?

Are you concerned your business partner will try and jip your spouse when you are dead?

Are you concerned about working for your business partner’s spouse?.

Social contribution Do you want to empower your

children to make a difference in the community?

Do you want to set an example to your children and grandchildren about ‘giving something back’?

Do you want to help you old school out?

Do you have a passion that you want to advance (e.g. art, medicine, education)?

Do you have a concern that you want to help solve (a particular disease, a disadvantaged group)?

Do you want to leave a legacy within the community?.

Segmenting clients

Different issues, different ‘groups’

Tier 1: Young families Mature families

Tier 2: Blended families Farming families SME business families

Tier 3: High-net-worth families.

Tier Client Categories Attributes 1 Young families

Mature families/individuals Low complexity Low value Moderate potential to sell risk

insurance Lower potential to sell financial advice

and accounting services 2 Blended families

Farming families SME business families

Moderate complexity High profitability Good potential to sell risk insurance,

financial advice, accounting services 3 High-net worth families High complexity

High maintenance Moderate profitability Relationship may be important to

other areas of your business

Parents with young kids Guardianship of minor

children Funding kid’s costs

(insurance) Not blowing up the

children at 18 (Wealth Preservation)

Choosing the right executors and trustees (Estate Administration)

Re-partnering of surviving spouse (Wealth preservation)

Maximising after-tax income to family.

Parents with older kids

Divorce of children Super/pensions Re-partnering of

surviving spouse Educating grandchildren Saving tax (for children

and grandchildren) Bankruptcy and asset

protection.www.adlaw.com.auAndreyev Doman Lawyers

Blended families

Identifying contributions to family assets

Dividing assets between families

Looking after younger children (how much should they get?)

Divorce of older children Re-partnering of surviving

spouse Saving tax.

Families with businesses Management of business (key

people, family council, board) Control of business – structures Timing of gifts – second chance

trusts Complexity of affairs Debts Buy-Sell Deed (and insurance

funding) Asset protection Re-partnering of surviving

spouse

Families with farms Keeping the farm together Keeping the farm in the family Timing of gifts Funding gifts to off-farm

family members (insurance/investments)

Divorce Debts Re-partnering of surviving

spouse Funding lifestyle of surviving

spouse.

High-net-worth ‘HMI’ Emotional counselling Businesses v. investments Bloodline Gradual release Family governance

Family Council Family Constitution

Family Office.www.adlaw.com.auAndreyev Doman Lawyers

Who needs a Testamentary Trust? When you have a lot of assets to share among children

“Asset direction” A young person with young kids

Tax benefits and “Second Chance” Trusts A middle aged person with a spouse and kids

Ensuring that assets end up with the kids An older person with kids and grandkids

Tax benefits, “Second Chance” Trusts and capital preservation When beneficiaries are at risk

Asset protection When beneficiaries have a high income

Income splitting When beneficiaries are disabled and cannot look after

themselveswww.adlaw.com.auAndreyev Doman Lawyers

Your role – ‘trusted’ adviser

Why is this relevant to you? You are in the best position to

take a leading role in this area: You already know the client You know their family and

financial affairs Estate Planning is already

part of your periodic review Accounting and financial

products are a key component to achieving outcomes

Estate Planning is about 'wealth management' - and that is your role

Emotional engagement with the client.

Is it ‘financial advice’?

Strictly speaking it is not ‘financial advice’.

But there may be ‘financial product’ inputs, e.g. insurance and investment management.

It is a ‘relationship role’

Is it ‘legal advice’? Advising on solutions Preparing documents Stop at the plain-

English ‘Estate Plan’ Always involve a

lawyer

It is a ‘relationship role’

Getting things started Get some knowledge about

the key issues. Analyse your database and

identify need. Send out information to raise

awareness. Meet with the client to raise

the key issues, and gather any missing data.

Get appointed to manage the solutions.

You don’t need to have all the answers to get started. www.adlaw.com.auAndreyev Doman Lawyers

Develop ‘Internal Experts’

Spread awareness Concentrate

knowledge Internal role External role (other

advisers) Focus and co-

ordination

What is your value?• Minimising relationships• Translating complex issues into plain English

• Saving time by coordinating data (and therefore money)

• Saving money through coordination of otherwise uncertain costs

• Getting things done

Getting client ‘buy-in’

The problem with Estate Planning

Estate Planning is often associated with ‘Wills’

People are not interested in Wills. They are boring. They may already have one.

So what can you do?

Creating a sense of urgency Position the process within the

client’s day-to-day life Loss mitigation v. opportunity

gain. Raise relevant issues Give examples Expand the frame of reference

before and after ‘death’

Offer to project manage the solutions.

‘Project manage’ the outcomes

Identify your value: Get appointed, Get paid

Remain in control of the process: Do not delegate, Get authority

Understand and manage pricing.

Identify complementary experts.

Develop ‘internal experts’ Stick to a simple timeline.

What are the ‘tangible’ outcomes? “Estate Plans” Wills – Testamentary

Trusts Enduring Powers of

Attorney Appointments of

Enduring Guardians Deeds of Mutual Wills

(‘Family Wills’) Super Nominations Deed Updates Self-Managed Super

Investment Strategies Buy-Sell Agreements Land Holding

Agreements Family Constitutions Family Conferences Savings Plans Risk Insurance

Value to your practice?

Value to your practice Upfront Estate Planning and

Business Succession facilitation

Risk Insurance – funding the Estate on death or other unexpected events

Financial Product Advice – managing the money for the current generation

Inter-generational Advice – following the money to the next generation

Family advisory boards – ongoing facilitation of discussions

Enhancing the emotional bond with the client.

How much should clients be paying?

You are saving time and cost: Data management Due diligence Project

management Annual

‘professional fee’. Separate

‘facilitation fee’.

Attributes Facilitation Fee

Level 1 Simple mum, dad and kids.No investment structures.Public offer super.

$330-$660

Level 2 SME business owners.Retirees with significant assets and SMSF/trust structures.Blended families.

$990-$1,650

Level 3 People with complex affairs and sophisticated business and investment structures.

$2,200 - $4,400

The role of risk insurance

Estate Planning and Business Succession advice is an indirect and more subtle way of introducing the importance of risk insurance

It can be presented in the context of a wider concern for the family and business objectives

Debts, legacies, income gaps and Buy-Sell Deeds.

Working with other advisers

Take a leading role Defining the role of other

parties Get the client’s

authority to speak with other advisers. This will put you in control

Working with the client’s existing advisers, versus introducing new advisers.

Control uncertainty

Why things go wrong You don’t identify your value

up front You think you need to know all

the answers You leave it to the lawyer,

and nothing happens You leave it to the client to

contact the lawyer – and it never happens

You leave it to the client and lawyer, and the client gets a bill they were not expecting

You leave it to the client to make decisions (e.g. guardians, etc), and the documents never get completed.

Useful tools Marketing materials

Information flyers Standard letters Website content

Instruction Sheets Develop an ‘Estate

Organiser’ Samples at

www.adlaw.com.au Documents

www.zumedocs.comwww.adlaw.com.auAndreyev Doman Lawyers

Recap on the value points

Identify clients with need

Raise the key issues Get appointed Gather and control the

data Project manage the

outcomes Reinforce the benefits.

What to do next?

Get an understanding of the key issues

Develop a relationship with a lawyer – they will be prepared to invest time in your education to win future work

Get your hands on some of the key tools

JUST START TALKING TO YOUR CLIENTS ABOUT THESE ISSUES.

How we can help? Do the legal stuff (i.e. documents) Provide you with training on the

issues Assist you segment your client

base Provide you with materials to raise

issues Provide you with systems to

document objectives and project manage outcomes

Mentor young advisers.

Questions?

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