One of my “secret weapons” is my association with the Sunbridge Legacy Builder Institute and , run by Scott Farnsworth in Harmony, FL. You can learn more about Sunbridge by clicking on their name. I wanted to share something that Scott wrote on the difference between Story-Based Planning and “Numbers”-Based Planning.

This article is written as a note to other advisors and planners, but I share it with you because I think it is an excellent illustration of the gap that I referenced at the beginning of this post. I want to comment further on all of this, especially regarding why I’ve adopted this model in my practice, but I don’t want this post to run too long. For now, enjoy Scott’s article.

The Power of Story-based Planning — Part 1 — By Scott Farnsworth

Virtually all my “official” training as an estate planning attorney and a Certified Financial Planner has been about numbers. Tax rates, code sections, rates of return on investments, asset allocation models-the unwavering focus has been on something quantifiable. The underlying message always came through loud and clear: unless something can be tallied on a ledger sheet, it isn’t worthy of our professional attention and probably isn’t all that important. Only “numbers-based planning” is real planning.

But my gut-and my real-life experience-told me something different. They told me that when numbers-based planning collided with human beings, i.e., our clients and their children and grandchildren, either the planning was never actually implemented by the clients, or the wheels came off when the planning landed with a thud on the succeeding generations. They told me that the most clever and tightly-wound estate or financial plans could and would be unraveled by the people they were designed to “help” or “protect.” They told that we planners ignore the human issues at our peril, and at the peril of the beautiful numbers-based plans we crank out.

My sense was often that with numbers-based planning, the tax tail was wagging the dog-driving the planning instead of riding in the back seat along with all the other significant but not critical factors. One significant study found that the likelihood of a family-based business surviving into the second generation was inversely correlated to the amount of tax planning the first generation had done. (Correlates of Success in Family Business Transitions, Morris, Williams, Allen, and Avila, Journal of Business Venturing 12, 365–401, 1997) In other words, the tax doctors were actually killing the patients they were hired to “save.”

Numbers-based planning might work if we were planning for robots, but we’re not. We’re planning for real flesh-and-blood people. I recall a series of conversations with a couple from New York City who had spent tens of thousands of dollars for one of the premier law firms in the country to draft a plan to care for their estate and their two teenage children. The plan touched all the legal and tax-planning bases, but in the words of the wife it was “cold and impersonal, not what I want to leave for my children.” The expensive, well-drafted plan was never executed but remained nothing more than a pile of paper, glistening with lawyerly brilliance on the surface but empty and meaningless underneath.

Unfortunately, that couple’s experience is repeated all too often. In my view, such outcomes will not change until we take a fundamentally different approach to this whole business of estate and financial planning. They will not change until we spend more time listening to client stories than tallying up their balance sheets; until we tailor their plans to the human hopes, dreams, and fears imbedded in their stories; and until the plans we create help them tell the story of their legacy-of who they really are and what impact they have had and hope to have on the people and causes they love. I call this approach story-based planning.

–Scott Farnsworth

Posted by Victor J. Medina, Medina Law Group, LLC

Trusts come in myriad forms, but for middle-class families, the living trust is popular because the person creating the trust can enjoy lifetime benefits. You can deposit assets in your own trust and ask the trustee to manage them prudently and pay the income to you, so you have more time for hobbies, travel and family.

Later, there are other important advantages. The property in a living trust that survives you can avoid the costs, publicity and delays of probate and speed property distribution to your spouse or other beneficiaries. If you choose, the trust can continue for their benefit in order to provide sound investment management and reliable financial support.

What Is a Living Trust, Anyway?

Unlike a trust you might establish by will, a living trust is set up by a written agreement between you and the trustee, and it takes effect immediately.

While you can be your own trustee, you may prefer to name a professional trustee to manage the trust assets, keep good records, pay you a regular income and—should you become incapacitated—pay your household and medical bills.

A living trust can be revocable or irrevocable. The advantage of a revocable trust is that you don’t give up control—you can amend its terms or even cancel it whenever you wish. On the other hand, you may want to put some of your assets in an irrevocable trust so you can achieve other significant goals.

For example, you could set up a charitable remainder trust to pay yourself a dependable income for your lifetime and then distribute the remaining principal to our organization. The substantial, current income tax savings as well as future estate tax savings of this kind of trust magnify its appeal.

Your Estate Plan, Too

A revocable living trust can be an important part of your estate plan. It’s an ideal vehicle for holding title to real estate outside your home state. You can make your life insurance payable to your trust. And the trust can include a credit shelter trust provision to help minimize estate taxes and other provisions to make gifts to family and charitable beneficiaries.

Along with your attorney, we can show you how a living trust can blend your personal needs, estate plans and philanthropic intentions.

SOURCE: University of Georgia in an article written by Mary L. McCormack

You can read the whole article here — and I’ve pasted most of the column below (and bolded my portion for my mom’s easy reading):

It was just a week ago that the nation was captivated and horrified by the runaway weather balloon that supposedly carried away six-year-old Falcon Heene–or so we thought. But the Heenes could now be, charged with staging an elaborate hoax.

While most people seem to be focused on the criminal charges the Heenes may face, what damage was inflicted on their children? And does the state of Colorado have grounds to intervene?

Clearly the incident had a detrimental effect on balloon boy himself, as the world watched him vomit on live TV during an interview with Meredith Viera.

Today we hear accusations from a former co-worker of Mayumi Heene claiming that Richard Heene is unbalanced and worrying that a Jonestown incident could ensue if his wife and children are not taken out of the home immediately and placed in protective care (apparently Richard was trying to earn enough money from a reality show so they could build a bunker and hide from the sun exploding in 2012).

And while I hate to see any child taken out their home and placed into the hands of strangers, there may be legitimate cause for concern.

In fact, it may already be too late to avoid state involvement according to Victor Medina, managing partner of Medina, Martinez & Castroll, a Pennington, NJ law firm focused on counseling families in crisis.

According to Medina, the state agency charged with child welfare has a responsibility to make sure the Heene kids are safe.

“If this was truly a hoax, you can bet the parents will have to explain why they thought it was a good idea to involve their kids in this stunt. If it wasn’t a hoax, then Richard and Mayumi Heene will still have to say why they permitted such a potentially dangerous situation to unfold. Either way, the Heenes can expect to answer for their actions as parents,” he said.

But state intervention isn’t always the answer, Medina contends. “By all accounts, this was a loving, if misguided, family. Sometimes the court system can get over-involved in the lives of a family and create more of a mess down the road. As in all things, reactions have to be carefully measured so that the best interests of the children, both balloon boy and his siblings, are served,” he says.

So what, if anything, can the Heenes do at this point to ensure their kids don’t wind up in the care of strangers if they are incarcerated or deemed unfit as parents by the state?

According to Georgia Family Law attorney, Steve Worrell, it’s not too late to make custody arraignments should both parents get slapped with jail time.

Worrell says, “The Heenes can name guardians now for their kids in the event the state deems it necessary to intervene. Then if they are found to be unfit, their choice of guardians will likely be honored by a court unless the selected parties are also found to be unfit.”

Only time will tell what’s going to happen with these poor children, but I’d like to know what you think? Should the state intervene to protect the welfare of these kids? Or is this just a case of poor judgment from otherwise loving parents that can be easily fixed with counseling?

Article written by Amber Watson-Tardiff and featured at NJ.com Parenting Guidance Section posted here on October 22, 2009.

Families With Minor Children

For families with minor children, I urge parents to invest time in planning for their children, in case they’re not around. This usually includes putting together a list of first-responders — those empowered and authorized to care for your children, so they’re never in the hands of strangers or government agencies. Naturally, those first responders need to know their rights and what is expected of them. Our firm helps the process by sending out letters to each of the first responders, letting them know what their role is, what to do and where they can turn to for help.

If you have minor children you will likely need to nominate guardians to care for your children if you’re not around. While not strictly a legal issue, I encourage parents to discuss certain issues with the guardians they name. In fact, I’m so committed to this part of the planning that I’m developing a tool to help parents along with the process.

Families With Trusts (Revocable, Testamentary or Otherwise)

Most of the planning I do includes the creation of any number of trusts. These trusts provide for trustees, which can serve during a client’s life, a client’s disability or after their death. I think it is very important that for clients to help educate the trustees that will later manage their estates. The second step of our Three-Step Strategy is a commitment to lifelong education and maintenance for clients and their loved ones. As a way to help that along, we offer specific trustee training for those families with trust-based plans. Whether you do planning with me or with another lawyer, even a general discussion of what’s involved and what your named trustees will be asked to do is helpful.

Families Without Trusts In Their Estate Plans

While I believe that a trust-based plan offers families the most flexibility, control and protection, some elect to go with a simple will. A proper will has executors named and it’s my suggestion that you have a conversation with those people about what you would like to happen. Remember that your will is completely public and your executor will need to report to the court and any potential beneficiary (even if you’ve decided to exclude them) what is going on with your assets and the settlement of your estate. Make sure you are comfortable with that before you consider your estate plan “done.”

Planning For Disability

One of the things you should absolute discuss with your family is your disability plan. Here, I’m talking about your advance health care directive, your financial power of attorney, and, if applicable, the disability plan created by your trust document. Giving folks who need to act in a crisis some idea of what to do and what you want is a good idea.

I’m aware how difficult a conversation it can be to discuss what you would like done in cases of catastrophic illness, or when you are near death. However, if you don’t communicate your wishes now, you won’t be able to in that condition. What’s the cost of writing down your wishes if those wishes aren’t known?

Final Thoughts

The last suggestion I have is to link up with trusted legal counsel and build a lifetime relationship. We work on making sure that we have close connections with our clients before crisis lands in their lap. Our philosophy is that it’s vital to create a relationship as a trusted advisor in the process so that those that are left can turn to someone familiar with the family and who you’ve tapped as worthy of shepherding them through the next stages.

Posted by Victor J. Medina Medina, Martinez & Castroll, LLC