Welcome to Financial Advisor IQ

Getting Money to the Next Generation (or Not)

By Miriam Rozen December 11, 2013

Estate-planning decisions ultimately rest with clients, but that doesn’t stop smart financial advisors from arming themselves with reasoned responses and adroit strategies for the emotionally fraught topic of how much, or how little, to give heirs.

After all, some clients are keen to pass as much as possible to their heirs, but others follow the credo of Warren Buffet, who once said he has no intention of setting up his heirs with “a lifetime supply of food stamps just because they came out of the right womb.”

Leigh Bivings, CEO of Artemis Financial Advisors in Boston, sees a generational shift in attitudes about leaving assets to children. Older clients are keener to give more to their children than are younger clients, and it’s not just because they have more time to mull such things over.

“A surprising number of clients express concerns that they don’t want to lavish money on their children,” says Bivings, whose firm manages about $70 million.

Though Bivings prefers to let clients reach their own conclusions about their bequests, she can imagine “being more directive” with her clients in special circumstances — say, where a potential heir is a drug addict. And where clients aren’t taking necessary action because they don’t know what assets they need in retirement, she might suggest a solution that builds in flexibility. In one example, clients leave some real estate outside their retirement equation with the idea of selling it later, either to defray their own long-term care needs or to fund a bequest for their children, just as circumstances allow.

Bivings has one client, a widow, who doesn’t want to give all her money to her kids but isn’t ready to write “huge checks to charity” either. In this case, Bivings acts as the client’s sounding board, weighing in only to provide a sense of the tax consequences of her various options. “I do the math, but I don’t steer them in one direction or another,” she says.

In one case of a childless widow, Thomas Lawson took a more active approach than Bivings might in similar circumstances. The head of T.W. Lawson Financial in Ann Arbor, Mich., helped her find alternative places to give her money. In addition to funding a scholarship at her husband’s alma mater, Lawson, whose firm manages $60 million, helped her set up bequests to her household staff.

Sticky Notes

Though most advisors derive satisfaction from helping clients make the bequests they want in smart ways, some wealth holders bring altogether too much drama to the estate-planning table.

Kristine Hartland, president of Peace Wealth Management in Largo, Fla., dropped one client for vacillating too frequently between heirs and the amounts she wanted to leave them. The trigger for these sometimes yearly changes to her will? She would get angry with relatives and withdraw bequests to punish them, sometimes telling them of her new intentions, sometimes not, says Hartland, whose firm manages about $75 million.

Kris Hartland

The client also liked to vent her spleen by constantly placing and replacing little sticky notes on her personal property labeled with “the name of the person she intended” — at that particular moment — “to receive each item,” adds Hartland. “If it wasn’t so sad, it could have been comical.”

But this client didn’t make the cut when Hartland decided to pare down her client list about a decade ago. “And I must say, I am happier for it,” she says.