Worst-Case Scenarios Can be Transformational Tools
This week we interviewed Masood Vojdani, CEO and founder of MV Financial, a wealth management firm based in Bethesda, Md. Vojdani recalls how helping a client through a worst-case scenario transformed the way he approached estate planning.
A number of years ago, I was involved in helping a client with her estate planning. At the time, she was in her early 60s; she had two adult children and two grandchildren under the age of 10. I put together an estate plan for her, which I ended up tweaking a decade later when she moved to a different state.
On the surface, it wasn’t a difficult estate plan to put together. My client told me that when she died, she wanted pretty much everything to go to her children. She didn’t feel as though she needed to plan for the grandchildren because she assumed their mother would take care of them. And then, the unthinkable happened: My client’s daughter passed away suddenly. Two weeks later, my client died. The two grandchildren were both under age 18.
Fortunately, the mother had set up a series of trusts for her children, so they were at least somewhat protected. But one of the trustees she had named ended up taking a self-serving approach.
Because we hadn’t built in protections to deal with such a situation, it required a lot of hard work to remove that trustee – and hours in court, which meant plenty of delays and frustrations, not to mention significant lawyers’ bills.
Ultimately, the situation worked out okay for the two kids. They’re now grown; one has just completed a master’s degree while the other will be graduating college soon. But the situation brought home to me how crucial it is to plan for the worst-case scenario, even if your client is resistant.
Now, when I create an estate plan for a client, I ask them about their desired outcome if something happened to the person they have designated as second in line, or even third and fourth in line. I don’t let them just write a trustee’s name down; I make sure that we have a conversation about that person. Are they trustworthy? Who would they answer to? I also make sure that trusts include a document that allows a trust protector to remove a trustee without having to go through an expensive and time-consuming legal battle.
Anytime you’re talking about estate planning, you’re talking about death and money – two things that most people really don’t want to talk about. It can be uncomfortable to bring up the eventuality of a client’s death, to say things like “After you pass, how do you want your money to be divided up?” That may be why many advisors stop there. Who wants to follow that conversation up with a discussion of potential scenarios that are even worse?
But as advisors, we have to be able to ask the tough questions. If we don’t help our clients think through these terrible possibilities they will choose the easy route and never bring them up. In most cases, that will be fine; the worst-case scenario usually doesn’t happen. Sometimes, though, it does.
Recently, I had a conversation with another client who had a similar family situation – an adult child in good health, as well as several grandchildren. I told him that even though it was unpleasant to think about, we had to create contingency plans in case his daughter died. I was surprised when he looked at me with relief.
“I’m so glad you brought it up,” he said. “I’ve thought about that before, but I didn’t want to verbalize it. So I’m grateful that you did.”