As a young trust officer, and during my subsequent 30+ years practicing financial planning, a sizable portion of the female population’s role included raising children and maintaining the family’s homestead. This situation, although traditional in the past, has evolved and now is changing the world in dramatic ways, as women today have taken charge of not only the family, but also, in many cases, the family’s finances.
I’ve spent most of my professional career catering to the needs of women in transition. This includes those women who unfortunately may have lost a spouse to death and those who may have dumped one through the process of divorce.
Women of today are much better formally educated than their forbearers, and fortunately, they have the capability of standing on their own when push comes to shove. They’re very often the breadwinner of their family, and, in so doing, have had to educate themselves in areas in which their mothers and grandmothers may not have been involved.
My role as a professional fee-only financial advisor has been one of an educator, filling in areas of expertise where required or requested. In addition, I’ve been teaching estate planning and cash flow management to financial advisors for more than 30 years within the National Association of Personal Financial Advisors, otherwise known as NAPFA. In 1983, I was one of the founding members of NAPFA, whose mission was to promote the services of “Fee-Only” financial planning by providing our clients their own personal fiduciary.
Our goal at NAPFA was to offer advice that was free of conflicts of interest. If the financial plan required the need for life insurance, for example, our role was/is to assist our client in finding a qualified agent or company who may serve in that solo capacity. However, long before we retained the services of the agent, we had already determined the needs of our client, and the agent’s role became one of providing the expertise and best product to fill in this missing gap for the client and her family.
The use of insurance products and investments was determined by the written financial plan, and once completed, the current needs of our client became abundantly clear. We discovered that in some cases, clients had been sold products either prematurely or that benefited the salesperson more than our client.
The same principle applied to investment management. Our role was to identify and then assess the needs of our client and identify a competent asset manager whose compensation was derived from fees, rather than from commissions, ensuring the manager’s interests were aligned with those of our clients.
We also developed a long-term spending plan (a 25-year projection) that became a blueprint for the future and allowed for changes to be made along the way. Life can take some interesting twists, but a written plan ensured it would be easier to clearly understand and adapt to these changes.
A very good example comes in the form of a second marriage. Can our client afford the possibility that this marriage may not work? Can she put her assets at risk and still assure herself of financial security or will the use of a pre-nuptual agreement provide the protections that allow her to sleep nights under most if not all conditions?
What about her minor children? How are they to be protected in the event of her death or disability? This is where the prenuptial agreement and a well drafted will and revocable trust will lay the foundation for the protection of her family. The selection of her executor, trustees, health care agent and guardians for her children can be laid out well in advance of any unforeseen set of circumstances.
Unlike their male counterparts, women we worked with wanted to be educated, rather than sold. We found the process was no different from any other form of education, and when our client was comfortable with her alternatives, we then became responsible for implementing those recommendations she felt comfortable with for herself and her family. Very often, the financial plan included planning for her children, and possibly grandchildren, to pass family assets to their chosen beneficiaries under the umbrella of “creditor protection” using Trusts.
Recognizing that there is more than one way to solve a problem, we often present alternative approaches for solving a family issue. Once each of these alternatives are explored for their pros and cons, our client is in a better position to determine which approach is right for her. It’s at this point that we offer to implement the process to its conclusion as and when requested.
Over the past eight years, or more specifically since 2009, “Federal” estate taxes no longer play a primary role in most estate planning situations. This is because as of January 1, 2017, an individual can pass $5,490,000, and a married couple can pass $11,980,000 of assets to named beneficiaries without any “Federal” estate taxation. However, planning and the use of trusts play a significant role in minimizing these taxes. In addition, we must consider that 15 states and the District of Columbia impose their own estate tax or inheritance tax, which must be factored in, even though the “Federal” tax will be zero.