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.

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

Usually, the newspaper includes an editorial, and a few months ago, one of the editors submitted a column about how difficult and frustrating it was to wind up the affairs of his mother’s estate. The thrust of his story was that he never got a chance to begin to grieve the loss of his mother, as she quickly became a set of papers and projects to be completed.

I completely sympathize with his position. As an attorney that helps families go through transitions, it’s all too familiar a situation that the person gets lost behind the process. That happens, too, by the way, when we help older folks transition from life on their own to an assisted living facility and then a nursing home.

One of the things that we focus on, especially when we get a chance to do proactive estate planning, is the transfer of wealth of the non-financial assets. The goal that we share with our clients is to make the transition as seamless as possible while at the same time allowing the client to maintain control and flexibility over their assets during their lifetime.

Ours is an atypical approach to estate planning, to be sure, but we find that this philosophy and approach resonate with almost every client and planning partner we encounter.

Also in this article was a suggestion by the writer that the use of living trusts was overrated in New Jersey because of the ease of the probate process. While I disagree with the notion that living trusts are overrated, I agree that the acceptance of a will into probate process in New Jersey is relatively painless. The Surrogate’s office makes the process of submitting a will and having Letters of Administration issued a fairly smooth one. (Especially when you have a qualified attorney to help you along the way.)

However, I was more than a little amused by the rest of the editor’s column, in which he begins to lament the obstacles and struggles that occur in the actual administration of the estate. I say amused only because most of his difficulties would have been greatly reduced by the existence of, you guessed it, a living trust.

Here is the link to the article where the editor gratefully published my response.

Posted by Victor Medina

MSNBC posted this article, concluding that the singer’s estate would not be settled without controversy.

I feel passionately enough about what I do for a living to take advantage of this emotional time to remind people how important it is to do estate planning NOW. Every time there is a celebrity death, especially when it comes as suddenly as Michael Jackson’s came, people on the news reflect how uncertain life is. And, we remind each other how little time we actually have.

In the end, what we pass on from generation-to-generation is not about money and finances that we leave behind. True, comprehensive estate planning is about capturing and transitioning your entire wealth. This includes non-financial assets, such as a your intellectual, spiritual, and emotional assets.

If it turns out that no complete estate plan was in place for Michael Jackson, the loved ones that he’s left behind will be rudderless and shortchanged because of a failure to preplan.

I honestly believe that I have an obligation, a moral obligation, to help people get their lives in order. The sense of accomplishment and peace of mind that happens when a comprehensive plan is in place is very valuable to my clients.

So, I’m going to remind people visiting the website, that you can sign up for a free report on the six mistakes to avoid when selecting an estate planning attorney. There it is a gift in that report that should help you move past procrastination towards the state where your affairs are in order, your mind is at rest with the knowledge that you have left guidance for your loved ones in case the unthinkable happens.

The Time is Now.

Posted by Victor J. Medina
Medina, Martinez & Castroll

Before I get to my take on the whole thing, I just want to comment how amusing I find the names of the companies. LegacyLocker,
AssetLock (formerly YouDeparted.com),
DeathSwitch,
SlightlyMorbid,
EternalSpace and
FindAGrave.

I’m not sure any of those inspire a lot of confidence, except for AssetLock — but then again, they were formerly known as YouDeparted.com).

Okay, with that out of the way, I actually think that the mission of these companies is laudable. As my clients know, I believe that proper estate planning contemplates the transfer of your entire wealth, not just your financial assets. This includes your “online” assets as well. For many people, a lot of time goes into developing an online presence and so much of our lives revolve around the use of social networking.

And while I think that an outside service is a reasonable way to pass those things on, I honestly believe that it should be part of a comprehensive estate plan that you do with your attorney. Beyond the ego-centric reasons for taking on this roll, attorneys have a much higher duty to safeguard this information than a third-party, for-profit entity.

Our firm focuses on establishing lifetime relationships with our clients that serve as the foundation for an effective and efficient transfer of wealth (financial or otherwise). With that as a backdrop, I think that your information is likely safer (because it’s not as big a target as a company that safeguard’s passwords) and the transition made easier (because of the closer interaction between your lawyer and your loved ones) using your attorney as a conduit than an outside company.

Some of these companies are doing exactly what I do in my practice — which is to help client capture their stories as part of their overall wealth. Every one of my clients has a Priceless Conversation as part of their comprehensive estate plan. The concept of Priceless Conversations deserves a blog post of its own, but suffice it to say that I believe that capturing, preserving, and passing on your stories is an essential part of an effective and complete estate plan.

Posted by Victor J. Medina
Medina, Martinez & Castroll