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Listen Now! Estate and legacy planning: What works, what doesn’t

In this 16-minute podcast, we explore the lessons we can all learn from families who have — or haven't — addressed legacy planning.

Adult daughter walking with father in a field

Let‘s Talk About Wealth is a new podcast series that touches on compelling topics for families of wealth. Through stories and conversations with specialists from Wells Fargo Private Bank, we help listeners learn how others have discovered ways to make more of an impact with their wealth — including wealth transfer.

Host: Noah Thomsen

Guests:

Paige Wilbur, national director of estate services, Wells Fargo Private Bank

Teresa Ridge, fiduciary services strategic planning consultant, Wells Fargo Private Bank

Allison Bren Ferris, national director, special needs trust services, Wells Fargo Private Bank

Podcast transcript:

[Noah]:

Estate and legacy planning is often an emotionally loaded topic. We’ve all seen the movies and TV shows and, while truth, as they say, can be stranger than fiction, it can also be a lot more complex.

Welcome to Let’s Talk About Wealth. I’m your host, Noah Thomsen. In this episode we’re going to share stories of how some families have approached — or, in some cases, haven’t — the passing on of their estates and the preservation of their legacies. We’ll see what’s worked, what hasn’t, and offer some ideas of what might work for you.

Up first is Paige Wilbur, the national director of estate services with Wells Fargo Private Bank. In her role, Paige focuses on the specific instances when Wells Fargo Bank has been nominated by the client to serve as executor and/or trustee in their estate plan to facilitate the transfer of their wealth. Welcome, Paige.

[Paige]:

Hi, Noah.

[Noah]:

So let’s get right to it. Why would a client nominate a bank to be executor instead of a family member? Wouldn’t that cause tension?

[Paige]:

Perhaps. There are lots of reasons why you would want a corporate fiduciary to serve in that important role rather than an individual. For example, making sure the decedent’s wishes are followed.

[Noah]:

You mean who gets what.

[Paige]:

Exactly. Family members may be inheriting assets but not necessarily equally distributed to them.

[Noah]:

Oh.

[Paige]:

Maybe a portion is going to charity and the family members are not happy about that. Maybe it’s going into a trust. Having a corporate fiduciary mitigates the infighting and ensures that the wishes of the decedent are followed to the letter.

[Noah]:

Maybe a conversation while the family member is living would have been nice?

[Paige]:

Exactly. And believe me, we’d prefer it that way. A conversation helps put everyone on the same page. And they’re all aware of what mom and dad wanted, or grandfather, or whoever it might be. But the reality is those can be very difficult conversations for that parent or grandparent.

[Noah]:

Interesting.

[Paige]:

And they really don’t want to deal with how their beneficiaries are going to react to that, especially if they’re favoring one family member over another or cutting one out.

[Noah]:

Do you have an example?

[Paige]:

Yes, I do. Two siblings who were named as co-executor in their father’s estate, and they hated each other, and the father knew this. The relationship team kept talking to the father about naming a corporate fiduciary but he thought that his children would band together over their mutual grief once he was gone. Long story short, they still wouldn’t talk to each other.

[Noah]:

Oh.

[Paige]:

All because the father couldn’t be honest with himself. So that’s my cautionary tale.

[Noah]:

Point taken.

[Paige]:

And it doesn’t even have to be contentious. Maybe the person lacks the time or expertise. Maybe they’re too busy, they have a family, or they’re running a business. Or perhaps the assets are located all over the country. If they have vacation homes, for example, you’re looking at possible probate in multiple states and it can get very expensive. A corporate fiduciary can handle all of that. An individual would probably have to hire a separate attorney in each jurisdiction to get it all done.

[Noah]:

It certainly sounds pricey. You mentioned trusts earlier, and that actually brings me to my next question: Trust versus will, should you pick one over the other?

[Paige]:

That’s a really good question. There are various reasons why clients would want to use a trust to transfer their wealth versus through a will, which requires probate. 

[Noah]:

OK.

[Paige]:

The number one thing is privacy. When you have death settlement handled through a will, that’s in the public record, as is the inventory of your assets. So there are many families obviously that want to keep that information private, which can be done through a trust. Also probate itself can be very expensive and the rules vary from state to state.

[Noah]:

OK; last question. We’ve seen what not to do. What should people do to make this process run more smoothly and ensure that their wishes are followed?

[Paige]:

Well, first let me say that it’s amazing how often we see high-net-worth individuals who either have an estate plan that hasn’t been updated in many years, or don’t have a plan at all.

[Noah]:

Hmm.

[Paige]:

Sometimes their attitude is, “I really don’t care because I’m not going to be here.” So first, put together an estate plan. Have an open and honest conversation with your estate planning attorney and wealth planners about what you want to have happen when you’re gone. And you can develop a plan together that lays that all out. And I can’t stress this enough: update, update, update. When life events happen such as divorce and getting remarried, adopting a child, moving to a different state, it all has consequences, and the plan needs to be updated. Otherwise there are probably going to be problems once you pass away.

[Noah]:

That was very enlightening, Paige. Thanks so much.

[Paige]:

My pleasure, Noah. Thanks for having me.

[Noah]:

We talked about the potential advantages of trusts over wills. But trusts can also be designed to accomplish just about anything, from establishing charitable foundations to transitioning family businesses to simply leaving money to heirs. And it’s surprising how often wealth creators aren’t on the same page when it comes to the nuts and bolts of those trusts. Here to talk about that is Teresa Ridge, fiduciary services strategic planning consultant with Wells Fargo Private Bank. Hi, Teresa; welcome.

[Teresa]:

Hey, Noah. Glad to be here.

[Noah]:

So tell us, Teresa, what’s going on here? Why aren’t folks in agreement?

[Teresa]:

Well, Noah, a few reasons. And I know in your earlier segment you were talking about people not having a plan.

[Noah]:

Mm-hmm.

[Teresa]:

We often end up seeing people who put off estate planning are prompted to finally put a plan together because of some catastrophe or tragedy.

[Noah]:

Yeah. Not the ideal circumstances.

[Teresa]:

Not at all. And even under scenarios that aren’t so dire, we find that a lot of people aren’t in agreement with one another as to the ultimate outcome of the plan.

[Noah]:

Hunh. Seems like that would be important. 

[Teresa]:

Very important. It could derail the whole plan. So we do some discovery and ask people to prioritize the things that are important to them, like education or charitable giving. And we’ll split up couples and have them go through some exercises individually to see where they land.

[Noah]:

And you’ve probably gotten some interesting results.

[Teresa]:

About 1 in 5 couples have ended up in agreement. And that’s the first aha moment for them.

[Noah]:

Interesting.

[Teresa]:

It’s what typically motivates them to get on the same page. And then we ask them, “How current is your plan?” Staying up to date is incredibly important.

[Noah]:

It sounds like it can be a little overwhelming.

[Teresa]:

Absolutely. It’s why a lot of people put it off. But we try to make it easier.

[Noah]:

How so?

[Teresa]:

Well, we try to put things in their simplest terms: “If you were to die today, this is what the trust says.” We put together a family tree and diagram out the trust document, so they can see how the estate is going to unfold.

[Noah]:

Hmm.

[Teresa]:

Maybe we see there are no plans for named guardians, provisions for special needs children, or aging parents that haven’t been provided for. So it’s very helpful to see if there are any gaps and get everything set up so that the plan will unfold as intended.

[Noah]:

That sounds really helpful. I was also wondering about passing on a family business. That seems to be something where clarity would be greatly appreciated.

[Teresa]:

Yes; very much so. In fact, I’ve found that business owners are the most underplanned type of client. They’re busy driving the family business and not really thinking about what happens to the business if they die. And there’s often an assumption that, for example, the most responsible child will take over. Then one of the things can happen: death, disability, or divorce. And one of those kids has to step in and make critical decisions that they just aren’t prepared for.

[Noah]:

Right. It’s one thing if they’d been groomed from the start, but …

[Teresa]:

Exactly. Now they’re conflicted. They have an obligation to their current life and family and now they feel obligated to their parents’ dream for them. The other issue we find is that mom and dad run the business in their own way and they have the skills to do it. The person taking over may not have the same skillset and may not be the best-qualified person to grow the business. Those are real conversations that often don’t come up.

[Host]:

I bet you have some stories …

[Teresa]:

I sure do. We had a patriarch, self-made, in his early 80s who moved to the West Coast with just few dollars in his pocket and built a multimillion-dollar business. He had just one daughter who wasn’t really involved with the business or showed any real desire to be. She had adult children of her own and the middle son showed promise, so the patriarch started to groom the grandson.

The other grandkids were doing some consulting and receiving compensation from the family business, although they weren’t really active in making business decisions. And then the patriarch passed away unexpectedly.

[Noah]:

I think I can see where this is going …

[Teresa]:

Yes. Now you’ve got the daughter who’s a cotrustee with the bank, and her son who’s running the business, and the other siblings not really involved in the business. The money from the estate is earmarked for charitable endeavors and now the middle grandson realizes, with the help of the bank, that the business can no longer employ his siblings. And the new management team and strict governance needs to be put in place as the dynamics of the estate plan shifted. It’s up to the son — not his mother — running the business to make the tough call and dismiss family members from the business.

[Noah]:

I take it he suddenly wasn’t very popular.

[Teresa]:

Not so much. When something like this happens, where a family lifestyle is being run through the business and circumstances change, not only can family dynamics be affected, but the value of the business as well. When transitioning a business, it’s important to clarify what the core business is and where the true value of the business lies. What’s needed long-term for the family? These kinds of questions can result in drastically different planning. 

[Noah]:

Wow, Teresa. That was quite a story. Thanks so much for joining us. I think you really laid out the pitfalls of inadequate planning for us.

[Teresa]:

Thank you so much for having me, Noah.

[Noah]:

Our last segment touches on a smaller area of estate planning: special needs. I’m joined by Allison Bren Ferris, national director, special needs trust services for Wells Fargo. Thanks for joining us, Allison.

[Allison]:

My pleasure, Noah.

[Noah]:

Tell us a little bit about special needs trusts, if you could.

[Allison]:

Sure. When I talk about this area, it’s not just about special needs trusts. It’s just as often as much about special needs planning. The essential focus of a special needs trust is to meet the beneficiary’s needs and protect means-tested public benefits. But when we’re helping families in this area, we’re really asking questions about everything: what are the future plans for the child’s living arrangements when the parents can’t care for them? Is a guardianship, or conservatorship, or a power of attorney in place? Has the family applied for public benefits and is the child receiving everything they’re eligible for? Do they have a social and recreational system set up for the child?

[Noah]:

That’s a lot to think about.

[Allison]:

It is. And it’s so important to ask these questions early on because one of the worst things that can happen is when these things haven’t been looked at — a beneficiary’s living at home, their second parent passes away, and now the trustee has a crisis situation where they’re trying to help the beneficiary put their life back together.

[Noah]:

Makes sense. So what’s the biggest obstacle to getting these plans in place?

[Allison]:

Well, we often see the families are just living for today — when you have a child living with a severe disability, families’ lives can be just consumed with trying to get whatever services and advocacy they can.

[Noah]:

Hmm.

[Allison]:

They may have a provision for a special needs trust in their will but they haven’t really started to think about planning holistically.

[Noah]:

So, what kinds of things do you do to make it easier for the family?

[Allison]:

Well, sometimes the most helpful thing is just having a conversation with them. We talk about the process, the issues, we answer any questions they might have. They may not understand how a special needs trust could help. They may not understand the role the professionals such as a trustee, or a case manager, or a professional guardian, or a representative payee might play in their overall plan. Sometimes they just have questions about benefits and a lot of times they’re trying to understand how much they need to put into a special needs trust.

[Noah]:

Wow. I can see how daunting it must feel.

[Allison]:

It really is. Sometimes we talk to them about the importance of a letter of intent as well, which is a document that’s separate from the trust that can outline the family’s goals and dreams and their vision for their child, or document other important information. We have a beneficiary questionnaire we provide and it captures a lot of this information. Write down the beneficiary’s favorite foods, their doctors, friends or family, their favorite types of activities, even their living preferences. When a beneficiary’s parents are gone, having this detail can be really helpful to the trustee, as it allows us to customize distributions in a meaningful way.

[Noah]:

That sounds very comprehensive. And helpful.

[Allison]:

Absolutely. We often get calls from clients who are focused on special needs trusts because their loved one receives public benefits. However, as we talk about the trust, it often brings up a whole host of other issues that truly get to the heart of the family’s concern, and that is, what happens to their child when they’re gone? When we can proactively help the family start to think about issues beyond the trust document, such as where their child will live, who will be their legal representative, and how to make their child’s life as meaningful and rich as possible. It’s really rewarding.

[Noah]:

Allison, I think that’s the perfect note to end our show on. Thanks so much for joining us.

[Allison]:

Thank you, Noah. I enjoyed being here.

[Noah]:

Well, that’s our show. I hope we’ve given you some useful insights and stories about what to do and when to do it when it comes to estate planning. Join us again for Lets Talk About Wealth. Until next time, this is Noah Thomsen. So long.


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