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Gaining Perspective on Estate Planning as a Women’s Issue



American women are an economic powerhouse. A study published by the Boston Consulting Group in July 2010, estimated that women in North America control $9 trillion in wealth — fully 50% of total wealth. They are living longer, inheriting wealth from spouses and parents, and owning their own businesses. Furthermore, many are the primary breadwinner or sole earner in their households. Many women enter marriage having accumulated their own wealth, while others are handling their finances for the first time due to death or divorce. Two thirds of women between the ages of 75 and 84 are single, widowed, or divorced, and are increasingly inheriting wealth due to longevity.

A primary concern of many women is the fear that they will outlive their assets and will be unable to provide for themselves in later years, especially if they need long- term care. Many individuals wait until a life-changing event to do estate planning, but the basis of any well-executed financial plan should include estate planning. As many women will pass on substantial wealth to their families, early planning is particularly important. Waiting until marriage, starting a family, retirement, incapacity, or when a spouse dies may not be the optimum way to protect assets and plan for the future. Estate planning tailored to the unique needs of women ensures that the disposition of their assets is aligned with their personal preferences while minimizing tax expense and protecting their assets and lifestyle.

Why, then, are women so underserved by trusts and estate practitioners? Women and men alike are already facing a new paradigm in wealth transfer planning. A $5.34 million federal estate and gift tax exemption in 2014, portability of the exemption for married couples, state estate and inheritance taxes that vary dramatically depending on the residence of both the donor and beneficiaries, and higher income taxes all require careful consideration before making lifetime transfers. Often achieving a Section 1014 “step-up” in basis for inherited assets is preferable to the tax incentives for making lifetime gifts. In short, some estate plans now require a greater degree of attention than before.

How practitioners relate to their women clients and explain these issues will dictate the practitioners’ success. Much of the focus of the discussion below is on the reasons this market is underserved and how to develop or expand a practice to focus on women and their estate and financial planning needs. Most importantly, consider the differences between men and women and how it affects their decision-making process.

The financial services industry and the legal and accounting professions have been “male focused” and are only now beginning to recognize the potential of the women’s market, building practice groups focused on the needs of women and also same-sex couples. While larger organizations have the capital and in-house staff to easily build these specialty practices, smaller firms and solo practitioners can also begin programs focused on women.

Women — an economic power on the rise

Much has been written in the last several years regarding the dramatic change in the economic power of women and how they will be the next big factor to affect the financial services industry. Liza Mundy, in her book The Richer Sex [1], describes the rising influence of women who are becoming better educated and more economically secure — almost 40% of wives in the U.S. earn more than their husbands. Women are marrying later or choosing not to marry at all, which puts the burden of estate planning squarely on their shoulders. According to the Boston Consulting Group [2], women worldwide earn a combined $29 trillion, of which $3 trillion is earned by U.S. women.

The 2013 study “Women, Money and Power Study: Empowered and Underserved,” by Allianz [3] underscored the fact that despite growing incomes, American women still have major gaps and unmet needs in their financial planning. Fully 90% of the “women of influence” surveyed said that increased financial involvement has improved their quality of life.

Women also own 10.6 million businesses and launch 70% of new businesses, with individual net worth of these owners ranging from $1 million to $25 million. If children intend to continue to operate these businesses well into the future, estate planning for these women needs to be more traditional, focusing on shifting business interests out of the taxable estate to remove appreciation rather than achieving higher basis.

Tailor the conversation

Research suggests that women and men have different attitudes toward money and wealth. Where men tend to  be  more  focused  on  tangibles, such as attaining a certain goal and are results oriented, women are more concerned with intangibles — values such as security, freedom, independence, and the welfare of their children and family. For instance, 70% of women worry about health care costs, compared to 57% of men [4]. Often these concerns are not uncovered during an initial meeting, with practitioners discussing the more technical details of estate planning. The authors have found in their practices that for women, estate planning is a very emotional subject. Their attitudes toward inherited wealth are often based on experiences with their own extended families and friends.

Women are more concerned with intangibles — values such as security, freedom, in- dependence, and the welfare of their children and family.

Opening the conversation with facts and figures about estate liability and getting into the intricate details of trusts and wills misses connecting with the client’s actual desires. Women seek validation and a demonstration that the professional understands their needs, and can deliver options and an understandable plan. It is not that they lack sophistication — it is simply that they approach the end goal differently.When meeting with women, either individually or in company with their spouses, a skilled practitioner will often discover different needs and concerns. When asked the question of what they want from the estate planning process, women usually express concern about outliving their money, having the ability to live comfortably in retirement, and the ability to pass on a legacy or assets to their family. Health care and long-term care for family members are also major concerns with the American Association for Long-Term Care  Insurance finding that 75% of those providing home care are female, most often a daughter [5].

Meeting with couples and sitting between them can feel like a marriage counseling session, but listening, asking questions, and validating the concerns of both spouses is deeply important. Women also tend to be more relationship and service-oriented than men and like to know that they are being taken care of by their advisors.

Developing a solid relationship should be a top priority for practitioners. It may take time and patience, but the results are worthwhile. Maintaining a close, continuous relationship will also pay dividends; when pleased with their advisors, women refer other clients.

Too often, women engage in estate planning only after a “triggering event” or crisis, or as part of overall planning with their spouses. There is a tremendous opportunity to begin working with women, individually or in concert with their families and spouses. Unfortunately, the Boston Consulting Group’s “Global Inquiry into Women and Consumerism” found that women around the world have identified the financial services industry as the one they are most dissatisfied with on both service and product level. The Allianz study also found that 62% of women do not even have a financial advisor.

Many financial services firms and practitioners have seen the potential in the “women’s market.” However, all too often, approaches to serving women have been without their active participation and without under- standing their core values and needs. Lack of ongoing involvement can lead women to change advisors as soon as possible after a spouse’s death. Research shows that fully 70% of widows do so.

One of the main reasons for this trend appears to be the lack of a relationship with the advisor and wanting a “fresh start.” As practitioners, we are concerned with the planning, conservation, and management of client assets but we should also be concerned with understanding our clients and building a relationship that lasts for many years to come. At the very least, accountants, lawyers, and financial service professionals need to involve the female spouse of their clients as a defensive move to protect their practices.

Areas of concern for women

Practitioners need to understand the areas of concern before approaching women clients or prospects. Having long run a practice focused on serving women, the authors have found that certain specific challenges are common between clients. Generally, women also prefer a more cooperative approach, while many men are comfortable with a more traditional presentation of facts and benefits, followed by solutions. Below are examples of client needs that were addressed first and the estate planning that was subsequently completed. The names and circumstances have been changed.

Leaving a legacy — example. Harriet’s attorney recommended that she complete her estate planning with an irrevocable trust funded with life insurance. She had two married adult children, an unmarried daughter, and a fourth child with an emotional disability. She was resistant to insurance planning, as she was concerned about the cost and her adult children were more interested in current gifts than in addressing future estate tax liability and liquidity needs. Harriet’s difficult experience with her special needs child had led her to execute a trust for that child’s benefit.

After several informal lunch meetings to build a relationship, Harriet was comfortable that we were all on the same page. The resulting plan was a team effort in which the client was an integral part. While executing the plan, we discovered that Harriet was charitably inclined — a fact that none of her previous advisors knew. She was excited by our recommendation that she establish a family foundation. She was particularly happy that her unmarried daughter would have a management role in the foundation. Harriet was proud of the fact that there would be a legacy to pass on in the family name and felt comfortable that the decision was made jointly with advisors rather than dictated.

“Too often, women engage in estate planning only after a “triggering event” or crisis, or as part of overall planning with their spouses.”

Conserving assets for family — example. Helen was referred for estate planning services by her tax ad- visor. She was married with one child, and the engagement was for a complete review of her financial planning. It became apparent early in the process that with total assets approximating $9 million and a cash flow analysis over 12 years to life expectancy that did not indicate substantial growth, she did not have an estate that would likely be subject to federal estate tax, although there would be state-level tax as New York residents.Later, the attorney approached her again about the idea of an irrevocable trust funded with insurance, and Harriet agreed to move forward. By being actively involved in estate planning that was aligned with her values and what she wanted to accomplish for her family, she was more comfortable accepting advice from her team of advisors.

The family’s wills had last been updated to force a credit shelter trust when the exemption was $2 million in 2007, and $5 million exemptions seemed like a fantasy. Helen was not initially impressed with revisions to address the state tax incurred unnecessarily when funding an indexed $5 million exemption.

As we built a relationship with her over a series of meetings, we found that Helen was primarily concerned about generating additional income for her husband should she predecease him. She also wanted her son to have liquidity to support the family home after both she and her husband died.

A woman’s decision-making process can be different from a man’s. Where men often seek efficiency, women may want to gather information at their own pace, consult with friends, and take time to consider options. This difference in decision-making processes should not be taken as a sign of disinterest. The several informal meetings we held with Helen demonstrated to her that she was integral to identifying issues and creating solutions rather than being “advised” on them. It also gave her the room necessary for her to share the additional concerns that led to a successful engagement.

Ultimately, the couple’s wills were updated with disclaimer language to allow funding of a credit shelter trust in the amount of the state estate exemption and otherwise rely on portability. Indexing of the survivor’s basic exclusion added to the deceased spousal unused exclusion (DSUE) was projected to continue to protect the estate from federal tax. Additionally, an irrevocable trust was executed for the benefit of their son and was funded with second-to-die life insurance for estate liquidity to ensure that their son would be able to maintain the family home.

Outliving one’s money

Fully two-thirds of women between the ages of 75 and 84 are single, and the current life expectancy for a woman turning 65 today is age 86 [6].  Many of these women outlive their spouses. Having not created their family wealth and, perhaps, not having been involved in family finances, many are left apprehensive and unprepared.

“Bag lady syndrome” — example. Sylvia was referred to a financial planner when she was in a crisis situation. She was 65, and her husband had just suffered a fatal heart attack. She was initially paralyzed with grief, and then, fear. She had no idea what her total assets were worth or where to look to start locating them. The first step was to deal with her immediate concern — whether she had enough to live on. Sylvia’s husband had invested well, but had not kept her in the financial loop, and his investment advisors never involved her in any discussions.

When Sylvia needed financial advice, the existing advisor was not called upon to assist, because a relationship had never been established. As mentioned previously, studies show that 70% of widows leave their husbands’ advisors. Too often, when the wealthy spouse is initially the husband, advisors neglect the wife. Understanding the statistical reality regarding the wealth that women are creating and controlling warrants a paradigm shift among advisors. The target audience and potential client base can be significantly expanded by understanding and attending to the subtle differences between how men and women interact. Although there are exceptions to every rule, women generally prioritize a relationship with an advisor over his or her perceived technical competence. Sylvia and Jack’s total net worth was a high eight-figure number. Yet, with the exception of basic wills, they had not done any serious estate planning. Cash flow, however, was not going to be her concern. Sylvia did not fully grasp the relative enormity of resources at her disposal because she was never involved in managing them, and her husband worked until his death, generating substantial earnings. She did not know enough about their finances to realize that he did not have to work.

After taking the time to develop a comfortable relationship with Sylvia and determining that cash flow would not be a problem, we were able to address estate planning opportunities that had been discussed with her husband a year prior to his heart attack but never implemented. Their “basic” wills actually included a credit shelter trust that was funded by the time we were discussing additional planning.

Sylvia was comfortable with what she was accomplishing for her children and had been involved in initial estate planning discussions while her husband was alive, which helped the process along. Because the estate was so large, and the couple had assets without much built-in gain, traditional planning made sense.

Even in today’s environment where the spread between estate tax and income tax has tightened, forgoing the  step up with lifetime gifts still makes great sense for the very wealthy. Sylvia eventually gifted the indexed $5 million exclusion and continues to run GRATs to try to limit growth of the taxable estate. The authors meet with her quarterly, review portfolio performance, and reassure Sylvia that she has sufficient income and assets so that she will not outlive her money.

After the loss of her husband and with the support of her team of advisors, she has taken an active interest in all aspects of her financial life and comes to meetings with prepared questions. She has also referred other family members to us, and we maintain regular contact with her. We recently began suggesting that she include her adult children in our review meetings to prepare the next generation for the wealth that they will inherit.

Conclusion

A practitioner need not be a woman to be able to work with women on their estate planning needs. While larger firms have the resources to go full throttle into a practice focused on women, it is not an impossible undertaking for smaller firms and solo practitioners. Getting started does not have to be complicated:

  • Consider partnering with a woman (if none are in the firm) and using a team approach when working with women clients.
  • Review client lists, and reach out to existing women clients.
  • Involve both spouses in all meetings and conversations.
  • Consider running an event for women — clients, prospects, and their friends — centered on a topic of interest. Research has shown that women work well in a welcoming environment with other women, so the authors suggest that the event be limited to only women.
  • Co-sponsor events with other professional organizations or firms to share costs.
  • Develop a mission statement and brochure outlining the services being offered for women.

Advisors and practitioners need to decide whether they want to proactively seek women clients. Considering the wealth that women control and the pace at which they are creating it, developing these relationships is clearly a worthwhile endeavor. For those practitioners thinking of working in the women’s market, it is important to develop an understanding of how potential clients think, and it does not hurt to have a woman on the team or to partner with a woman in a complementary practice. By truly under- standing that men and women have different concerns, often thinking and communicating differently, and treating them accordingly, advisors of any sex can realize great success by working with women.

(Joan Antoniello and David Weinstock’s article “Gain Perspective on Estate Planning as a Women’s Issue” appears in the July 2014 issue of Estate Planning magazine, a Thomson Reuters publication)

[1] Mundy, “The Richer Sex: How the New Majority of Female Breadwinners Is Transforming Sex, Love and Family” (Simon &Schuster, 2012).
[2] As reported in Dunleavey, “Mars, Venus and the Handling of Money,” NY Times, 2/22/2014.
[3] More details about the study are available at https://www.allianzlife.com/retirement/retirement-insights/women-money-and-power.
[4] As reported in Merrill Lynch Affluent Insights Quarterly; see //www.businesswire.com/news/home/20110131005332/en/Merrill-Lynch-Affluent-Insights-Quarterly-Survey-Finds.
[5] ‘‘Long-Term Care – Important Information for Women,” American Asociation for Long-Term Care Insurance consumer’s information center; see //www.aaltci.org/long-termcare-insurance/learning-center/for-women.php.
[6] 6 Social Security Administration website; see //www.ssa.gov/planners/lifeexpectancy.htm.




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