Are you stuck in the estate planning maze?

By Scott Keffer

How was I supposed to answer one of the most preeminent heart surgeons?

“Should I put my house into a QPRT? An estate planning advisor is suggesting one. Do you recommend them?” Dr. Bantam fired at me as his time in line came up following a recent workshop.

“Why not a CLUT, CRAT, FLP, GDOT, APT, PPN, or an RLT?” was not the response the doctor had expected. “You are stuck in the estate planning maze!”

“Explain,” Dr. Bantam almost demanded.

“Do you remember in Alice in Wonderland how Alice came to a Y in the road and looked left and right – and she couldn’t decide which way to go. The Cheshire cat was sitting next to the road, so she asked him if he could help her decide which way to go. He responded by simply asking her where it was that she wanted to go. Alice replied that she didn’t know. The Cheshire cat shot back, “Then it doesn’t matter. You’re stuck.”

“I feel stuck. I don’t like feeling like I don’t know what to do.” The ever-in-control-and-always-sure-of-himself surgeon answered honestly.

“Why are you considering it?” I queried.

“I’m not really sure. To save estate taxes – I think?” Dr. Bantam answered.

“You are in a binary decision trap. Yes or no. There is a better question. Is it consistent with your vision and values – and is it the best strategy?” I probed further.

He stared at me for a moment. “How would I know?” he asked.

For me, this conversation is dE9jE0 vu. Fire, fire, ready, aim. That’s how most people plan. In truth, most never get around to ready, aim – it’s only fire, fire. Reactive planning. Very dangerous.

“Is it consistent with your mission for your money?” I said.

Dr. Bantam looked puzzled as he blurted out, “My mission for my money?!? What is that?”

“Think about it,” I said for the thousandth time, repeating the wisdom that I’ve learned the hard way, “you would never run a hospital, or any business for that matter, without a mission, so why would you make decisions about your money without one? Mission should drive the planning process and simplify decisions by creating a decision-making filter and grid. Without mission driving the planning process, it is always fire, fire, ready, aim.”

“That’s the way I’ve planned. One thing here. Another there. I don’t really know where it leaves me.’’ Dr. Bantam shared.

I told him, “You are stuck in the estate planning maze, which inevitably leads to paralysis analysis.”

I really wanted to help Dr. Bantam see that the lack of mission and process were the source of his confusion, so I asked him this question, “Is your purpose to serve your money or is your money to serve your purpose in life? When your money is serving your purpose, there are certain things you will experience: peace of mind, financial freedom, and lasting impact. The opposite is worry, fear and confusion.”

I quickly grabbed a small cocktail napkin, and wrote the word ‘worry’ on the left side and ‘peace of mind’ on the right side and connected them with a line.

“Put a dot on the line indicating where you are – closer to ‘worry’ or closer to ‘peace of mind’” I said, sensing that it would be hard for this successful doctor to admit the truth.

The exercise was repeated with the other two: ‘fear’ versus ‘financial freedom’; then ‘chaos’ versus ‘lasting impact’.

“Most people, even with substantial money, lean toward the left just like you. In a recent survey of those who had accumulated wealth between $1 million to $10 million, how many do you think were very concerned about running out of money – six out of ten, seven out of ten, or nine out of ten?” I asked, knowing that almost everyone gets it wrong.

“I don’t know. Maybe six – no, seven out of ten,” Bantam answered.

“Actually, it is nine out of ten! So, if you put a QPRT into effect, what impact will it have on your cash flow – your future wealth – your taxes?” I asked rhetorically. “Everything has side effects. How will you minimize the side effects of the QPRT? How will you minimize tactic interactions? Just like drug interactions, there are tactic interactions. Are you aware of the interactions that a QPRT would cause?”

After an awkward moment of silence, Dr. Bantam reluctantly admitted, “Those are pretty good questions that I don’t know the answer to – questions that should have been brought up already, right?”

I answered him with a story. “A very successful business owner asked me a similar question, except he had already completed the estate planning tactic. I asked him if he had a mission statement. He said no. I asked him if he had stress tested his wealth for side effects or tactic interactions. He said no again. We completed a stress test on his wealth and showed him that he was out of money in ten years. I told him that I hoped that he would have great relationships with the children and their spouses, because they would have all the money, and I told him that the tax tail should never wag the dog. Another example of fire, fire, never aim. The result is always big problems.”

“What do you suggest?” Dr. Bantam asked with a tone that suggested that he might even listen.

“Clarity leads you out of the maze. Clarity about three things: what you want; what you have; and what you need. Start with a money mission statement. From there, draft a clear set of priorities and measurable goals. Next, you need to stress test your present wealth plan. Your present plan may be fine, but you’ll never know until you stress test it. A stress test will reveal strengths and expose flaws and weaknesses. Your money mission, priorities and goals and your stress test create a decision-making filter that eliminates 80 percent of the tactics right off the bat. The balance of the tactics can be tested in your wealth model for side effects and tactic interactions,” I encouraged. “The result is clarity like you have never experienced before, and simplicity, and escape from the estate planning maze.”

How about you? Are you stuck in the estate planning maze? Experiencing the Alice in Wonderland conundrum? If you find yourself in a position where you have to say “yes” or “no” and you are not comfortable, stop!

Step back and ask, “What is the best thing that I can do?” If you are not sure of the answer, go back and reread your money mission, priorities and goals. Let your mission and purpose drive the planning process, not the other way around. When you do, you will experience tremendous clarity of thinking, and freedom from the estate planning maze.

Scott Keffer is president and founder of Wealth Transfer Solutions, Inc., a legacy planning company in Pittsburgh.