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MAKING MONEY FROM ESTATE PLANNING“BURNING ISSUES”
Andrew AndreyevNovember 2012
What we will cover
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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?
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www.adlaw.com.auAndreyev Doman Lawyers
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
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Self-generated ‘market’33% divorce50% re-marry600,000 family trusts458,000 SMSFs (trillions in super)
Million of companies60% of people don’t have Wills
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The high-level stuff
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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’.
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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
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Quick self-assessment
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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
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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
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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
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What can you do?
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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.
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Documenting objectives Simple ‘plain English’
summary of what needs to be addressed
How good is the lawyer? Why your client should
not care
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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.
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‘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.
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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.
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www.adlaw.com.auAndreyev Doman Lawyers
What are the key issues?
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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
Home
Family trusts
Investmentproperty
Companies
Business
Shares
Nominate "Estate"
"Joint"
Nominate "Estate"
Insurance Policy
Stocksand bonds
Buy-Sell Agreement
Binding Nomination "Trust Will"Nomination
Will
Named policybeneficiary "Dependent" New "controller" of
trust or assets
Insurance Policy
Cashat bank
Investmentproperty
Personaleffects
Beneficiaries under Will/Testamentary trusts
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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?.
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www.adlaw.com.auAndreyev Doman Lawyers
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?.
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“Family Wills”
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“Control, without legal ownership”
Testamentary Trust
Deceased
Surviving spouse
DECEASED'S ESTATE
Assets
Child BChild A
Pre-taxincome
Pre-taxincome
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www.adlaw.com.auAndreyev Doman Lawyers
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?.
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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
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Adjustments for ‘notional assets’
Adjustments to reduce tax
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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?.
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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
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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.
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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
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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.
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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.
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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
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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.
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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
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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’
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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’
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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’
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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
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Getting client ‘buy-in’
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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?
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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.
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‘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.
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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
Funds
Investment Strategies Buy-Sell Agreements Land Holding
Agreements Family Constitutions Family Conferences Savings Plans Risk Insurance
Value to your practice?
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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
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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.
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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.
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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
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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.
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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.
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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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