Estateplans, enduring powers of attorney and wills need to be robust and flexible, so they can easily accommodate changes in client circumstances.
Sound wisdom dictates that people should regularly review their affairs, particularly when there is a change in circumstances caused by death, divorce and incapacity, but the reality is that people will not do a review unless ‘nagged’ or cajoled by their advisers. They also prefer to move forward rather than ‘reinvent the wheel’ — which is how they see a new estate plan, enduring powers of attorney and wills.
There are potentially four ‘separation’ situations: 1. The client separated from the partner due to marital breakdown; 2. The client separated from the partner due to death; 3. The client remarrying (and the surviving client has children and/or grandchildren); and 4. The client/s becoming estranged from the children, the previous parents in law, and so on.
Estate planning is not merely about money, it is about people. Advisers therefore need to be educated in their training on the rights and responsibilities of all involved — the clients, their children, third parties and advisers.
They then need to be technically competent and have a system that is able to identify the problems and issues and able to develop solutions.
We have a methodology to train advisers so they can manage the emotions and develop trust and confidence from all parties (even the spouses of the children). We ensure information is efficiently gathered, that is, we ask the right questions in an organised format in the right way.
Our advice is three pronged — personal, financial and legal. We use psychology, financial instruments and legal tools — for example, we make good use of wills to create testamentary trusts.
However, we warn advisers who use a standard format or standard wording. Each will that creates a testamentary discretionary trust must be tailored to the situation to do the job effectively and with as little fuss as possible. A lawyer will need good, precise and well-thought through instructions.
There are too many advisers using solicitors providing them with pro forma documents for drafting of testamentary discretionary trusts and this can be dangerous. Don’t do it on the cheap. Do it right and the clients will happily pay you for it.
Jack Houwing is director of boutique dealer group, Financial Options.
