Lisa Snyder, a wealth management consultant with UBS Wealth Management Americas in Los Angeles, believes an important change in attitudes about estate planning happens in families whose assets exceed $30 million, especially among older clients who earned that money.
High-net-worth clients whose wealth is less than $30 million are generally concerned about avoiding paying taxes and avoiding probate court, Snyder says. But for ultrawealthy individuals with assets of more than $30 million, particularly as they get older, there is also a concern about what their legacy will be and about how their offspring are going to handle all the money they inherit.
By contrast, for those who may just have a few million bucks to pass on, Snyder says, a simple living trust that goes into effect on death, giving instructions on how the estate should be distributed, can be sufficient, at least for adult children.
HOLDING ONTO INHERITANCES
But before elderly ultrahigh-net-worth clients make plans to will $10 million or more to each of their offspring, Snyder says, "they want to know what their heirs' marriages look like, what their level of fiscal responsibility is, and just how much money they want to give to them."
Often, she says, an extremely wealthy client will opt to donate significant assets to a charity and leave a lesser amount to heirs. And, even then, if the heirs are relatively young -- for example -- grandchildren, the client will set up trusts and name a trustee so that the heirs might get some money immediately, a third of the funds at age 30 and half at age 40, with the rest coming later on.
"Or sometimes you see a trust that establishes a distribution schedule, but then makes the heirs the trustees, so that they have the power to alter the terms of the distribution," she says.
Snyder notes that history suggests there's good reason for clients to be cautious about passing all their wealth on to their children when they die. "Studies show that 50% of inheritances are all gone at the end of the second generation, and 90% of all inheritances are all gone by the end of the third," she says.
Stephanie Zaffos, managing director for trusts and estate planning at Convergent Wealth Advisors in Los Angeles, says any client with less than $5.4 million in assets isn't likely to be highly concerned about estate taxes. Above that level, clients focus primarily on keeping taxes as low as possible so that the maximum possible amount goes to heirs.
When it comes to her ultrawealthy clients, she says, especially the ones who are older and are looking at several generations of heirs, she sees people considering how to protect assets for the longer term. "Many of them are thinking about the welfare not just of grandchildren," she says, "but of generations unborn."
She agrees with Snyder that many wealthy older clients also worry about giving too much to their progeny, not too little, and so they may be more focused on their charity giving, often setting up a family foundation to involve their children in their charitable interests.
Dave Lindorff has contributed to Businessweek, The Nation and Salon.com.
This story is part of a 30-day series on better serving seniors.