The Power of Story-based Planning Part 2

For at least the last decade, the hottest buzzword in the planning professions has been “values-based.” You couldn’t turn around without running into “values-based” selling, financial planning, estate planning, you name it. But what in the world is “values-based planning” anyway?

Looking under the label and behind the question is helpful, I believe. In truth, all planning is based on someone’s values, so the question behind the question is whose values? To acknowledge our professions’ dirty little secret, the truth of the matter is that in the “pre-values-based planning era” nearly all planning was based on the professional’s values or, at best, on the values we assumed the clients held.

If the professional was selling life insurance, lo and behold, one of the key values was “tax-free liquidity at death.” If the professional was selling living trusts, it was generally assumed the clients valued “avoiding probate,” “reducing estate taxes,” and “distributing the assets” in some orderly fashion, usually in a way consistent with the drafter’s trust templates. If the professional was selling investments, every financial plan was based on the premise that the client wanted to pay for his kids’ college and then retire comfortably a few years before he turned 65.

Not surprisingly, every plan a planner created looked strikingly similar to every other plan he created: they were all based on the planner’s values and assumptions, not the client’s.

What the term “values-based planning” was trying to communicate was the notion that each client has a personal set of values that ought to be ascertained early on in the planning process and then used to fashion a financial plan or estate plan that was unique – truly unique – to that client. The real question then became, for those planners actually trying to create plans based on client values, “how do you ascertain the client’s values?” At least now the issue was correctly framed.

This breakthrough led to the advent of what I call “questionnaire-based planning.” Client values, the planning professions assume, can be ascertained through a cleverly designed multi-page questionnaire. But while “questionnaire-based planning” is far better than its predecessors, it still fails in its primary objective: to develop for the planner and the client a clear understanding of what’s in the client’s heart – the client’s deepest purposes for planning. For that you need story-based planning.

In the next installment I’ll outline why “questionnaire-based planning” is merely masquerading as genuine values-based planning. It looks good on the outside, but inside it has no real power to get to the heart of the matter.

Original post by Scott Farnsworth. Published on February 24, 2010 on New Jersey Estate Planning by Victor Medina, Medina Law Group.

Of course, no one doing the reporting is an estate planning attorney, so they didn’t mention the likelihood that there were likely ZERO assets owned in his individual name. The Family Trust referenced in his Will was likely created before he died and, if he did the right thing, his assets were funded into that trust. (The Family Trust was probably a living trust. Living trusts are like buckets. Funding is the process of taking your assets and putting them in the bucket.).

Instead of tearing apart the Will, dissecting the provisions of the guardianship nomination, I want to spend a few paragraphs discussing all of the right moves that Michael Jackson made in planning his estate. (I’m more of a “glass-half-full” kinda guy.)

First, he created a living trust and funded his assets into the trust. Back in the days where you could eat 6 days a week on a lawyer’s dime listening to a living trust seminar (the same rubber chicken meal, for sure), people were flocking to lawyers to have these magic books created.

What happened then, and what still happens often in estate planning, is that the lawyers left the job of funding the trust to clients, without any guidance (or at least, guidance that wasn’t billed hourly) from the lawyer. Personally, I think that’s a terrible way to practice and so we’re very diligent about making sure that our client’s trusts are funded.

If you visit a traditional estate planning attorney, clients are sent home with a nice, leather-bound book and a letter saying, “Now go move your assets into the trust.” This is hardly the best way to serve a client. Regardless, I’m hoping that Michael went with a great estate planning attorney that made sure that the assets were funded into the Family Trust.

We’ll soon learn whether the trust was fully funded because if Michael Jackson owned any assets in his individual name, they’ll have to go through probate to be put into the Family Trust – and we’ll see just how good his estate planning was.

Second, as a parent of young children, Michael likely separated the responsibility of caring for the kids from the caring of the money. (Again, we don’t know for sure because the Family Trust is a private document.) When I counsel clients with minor kids, I tell them that the only way to make sure that they money they leave for their children (through term life insurance or otherwise) is to keep the guardian’s hands off the spigot. That means having one person serve as guardian and a totally different person serve as trustee of the Trust created for the kids’ benefit.

As you can see, if you have the same person serving both roles, there is chance that the funds will be depleted before the kids are done being raised. Just as important, you will have lost control over the assets that you left for your children’s benefit. This issue is not so much about trust, but about control and taking every step that the assets you took time to plan to leave for your loved ones are there when they need them.

While we don’t know exactly who is named as a trustee, Michael likely kept those roles separate and therefore made it much more likely that the money will be used correctly for his children’s benefit and will last throughout their lifetime.

Third, his Family Trust afforded him the opportunity to keep his affairs private. We already know how fiercely private Michael Jackson was. If he died early, there would like be a frenzy of publicity digging into his life, his finances, etc. By creating a living trust, he’s been able to minimize the effect of his death as to access of his affairs. And you can see the fruits of this in the way that no one has been able to report what is in the Trust, who the trustees are, and who gets what, etc.

Now, it may be that one day the document is leaked, but the difference is that the Will was required to be filed as a public document, whereas the Trust is a completely private document. Unless you are a mega celebrity, the people that you trust with your assets (like your lawyer and your trustees) will be able to keep that secret and your affairs private. Even when predators come in to see if they can get some of those hard-earned financial assets that you left for your children.

Finally, Michael planned before it was too late. It’s unfortunate that it takes a tragedy for us to act – and it’s even worse that people will say “I need to so something” now and forget about it in a few weeks.

Unfortunately, tragedy knows no economy. The time is now for you to plan. As an estate planning attorney, father and husband, I’m thrilled to see that Michael Jackson did some good planning before he died.

I’m hosting a workshop on July 12th at 4pm at The Little Gym-West Windsor. If you are thinking about taking action and planning your estate, you owe it to yourself to attend. Here is the link for more information – Kids Protection Planning Workshop

Posted by Victor J. Medina
Personal Family Lawyer

I apologize that the link is coming from TMZ (a bit exploitive), but it’s worth it to show what happens with proper planning. Rather than hear a story about how someone failed to provide for people after their death, or learn the intimate details of who was getting what, when and how (traditional, public wills) – we get a will that says exactly what it should say: everything left to the living trust.

Now, I can only hope that there were few or no assets left in Crichton’s individual name. (A proper trust is one that is fully-funded with the decedent’s assets.) Assuming that’s true, Crichton accomplished a few, incredible things. First, he totally or near totally avoided the time and expense of probating a will. If he owned property in more than one state (as the wealthy often do) and transferred title to the living trust, he avoided having to probate each of those properties in the states where they lie.

Second, he ensured that the administration of his estate took more like 15 minutes than 15 months. Third, he left a portion of his estate totally and completely protected from creditors and predators.

Actually, I can go on and on with the benefits, but it makes me so happy (really it does) to see someone has invested the time and money while they were still alive to make the transition smoother for them in the future.

As I say to my clients all the time, it’s much easier for you to take care of these things while you’re alive and well than it will ever be for your family to do it when you’re gone, if you don’t.

Finally, check out the comments on that news piece I posted – there was someone who recognized that he did some proper planning.

News stories like these make me proud to be a Personal Family Lawyer.

Chances are, most times people will go to 4 or 5 different attorneys for those things and not come back to their own personal family lawyer to assist them along the way. Our law firm is doing things different. Our goal is to be your lawyer for life. Whether you come to us in a crisis, or as part of your proactive planning in life, we will be here for you for the long haul. You won’t have to worry about looking for references or taking a chance on a lawyer you hardly know. If we’ve been doing our job correctly, we’ll be with you every step of your life and as the needs arises, we’ll be by your side to help you when you need a lawyer.

This blog is primarily about estate planning, and we’ll get back to that subject in a minute, but I thought it was important to discuss this firm’s guiding principles. One of them is being your lawyer for life.

If you have a need to see an attorney, whether for a real estate purchase, family wealth planning, or some other matter, schedule your appointment today to meet with your Personal Family Lawyer and begin the relationship of a lifetime.

We only have 10 spots open every month for new clients and we’re already booking into August – don’t let this month go by without starting that lifetime relationship.

Visit the Medina, Martinez & Castroll, LLC Website and call our Client Services Director Tiffany Lauritsen to reserve your spot.

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