Whether it’s starting a diet, buying or selling a business, or discussing your family’s wealth with your kids, there are always reasons (real or otherwise) that keep us from doing something. to put us in a better place.
In the last half of 2021, wealth management firms and trust companies, lawyers, accountants and valuation experts were inundated with existing clients and new clients rushing headlong to complete their wealth planning to to overcome the threat of a year of major federal tax changes. It seemed like everyone went from “cold” to “very hot” in their planning.
So why do clients procrastinate when it comes to wealth planning? Why does it so often take a momentous event to cause us to take action that could lead to a better place?
We see procrastination coming from four directions. Each of these reasons can derail a step in the planning process, from start-up to implementing decisions. The stakes can be emotionally and financially high for the family delaying action on their planning.
But by knowing these triggers, advisors can help clients overcome them and make life infinitely easier for themselves and their beneficiaries.
Negative emotions are, by nature, unpleasant. They can mean dealing with feelings about our mortality, failures, incompetence, lack of confidence, lack of control, and anxiety.
It follows that wealth planning can sometimes invoke these negative feelings. This may mean having to discuss your estate with family members or making difficult decisions for or about your beneficiaries.
A delay in dealing with these issues could make the problems worse. Usually, what we avoid doesn’t magically disappear. The reality is that we are not given a fixed time on Earth. Ideally, we see ourselves walking into the sunset under our own power and on our own terms after living a long and happy life. But, there is no crystal ball to tell us if, when, and if we will lose our ability to make decisions for ourselves, whether through physical or mental illness or, ultimately, cause of death.
But kicking the box can put those we are trying to protect in a much worse situation, because they no longer benefit from our guidance if called upon to act. For example, if we die without a will, anonymous court officials will appoint an administrator to probate our estates, perhaps someone we did not intend to serve in this position, which could cause unnecessary family disputes. .
The earlier we start planning, the more time we have to navigate through emotional issues that may arise and plan difficult conversations with family members, including hiring professional counselors to help us.
Trying to achieve the perfect plan can lead to failure because “perfect” can be a moving target.
There can always be reasons why our plans won’t be perfect. If we can reframe our goals to think that the planning process is continuous with periods of productivity (active planning) based on our priorities that correspond to time and energy, we can gradually improve our situations or make significant progress on a major problem.
The planning is never really “done”. It evolves as the needs, wants and desires of the family change. It will be influenced by external factors such as tax laws and the economy as well as internal events such as births, marriages, divorces, the buying and selling of a business, and health.
Whether it’s evaluating the performance of our life insurance policies, reviewing beneficiary designations on accounts; or given the role of our heritage in family, philanthropy and legacy, there will always be additional planning to do. Something always comes back. Accepting that our plans aren’t perfect can help free us up to tackle more pressing issues. None of us should avoid the “good” for an outward chance of attaining the “perfect”.
Fear of “permanence”
A common reason for some delaying commitment to planning is the fear that planning is irrevocable. Sometimes we worry that a planning strategy can be undone if it doesn’t work or if the facts of our lives have changed significantly since it was implemented.
We should expect our estate plans to evolve over time to meet the changing needs of families. Our key estate planning documents, such as our will and revocable trusts, can be changed until we die. Beneficiary designations, trustee appointments and supporting documents, such as powers of attorney and enduring health care powers, can all be changed up to the time of disability or death.
A well thought out plan should provide safety valves and mechanisms to deal with unexpected future events. It is important to note that plans should be reviewed periodically. Permanent is rarely as “permanent” as one might think.
Overwhelmed by planning
The wealth planning process can involve a team of advisors including lawyers, accountants, valuation companies, bankers, investment companies, trust companies and more. That may seem like a lot.
Planning can involve complex income, estate and gift tax laws while dealing with the emotional issues that come with making decisions about how to care for and protect your family in the event of disability. and death.
It can be an overwhelming experience that can delay important decisions or, worse, stop the process.
Moving the process forward doesn’t have to be overwhelming. Developing a project plan and timeline is a manageable approach to breaking larger issues down into manageable steps that can be prioritized based on our goals and desired outcomes. Having the right team of advisors on board can be an important and valuable asset in guiding us through many of these issues.
The reasons why we all procrastinate in financial planning are completely understandable. However, the danger of not having a plan in place is the worst outcome.
Prioritizing our goals and working on the issues we feel are most urgent will minimize the risk of being overwhelmed. Additionally, having time to be deliberate and thoughtful in our planning gives us time to fully understand the benefits and opportunities of decisions before making them.
As soon as we get moving, we become more likely to stay moving. Planning can take some time. But understanding the barriers to getting started will help us move forward and put us in a better position tomorrow than today.
Drew Horwitz is the National Director of Wealth Management Strategies for Wilmington Trust.