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An estate planner is meeting with a baby boomer couple in the planner’s conference room. 

The planner did the couple’s estate-planning documents years ago. The central features of the plan are self-trusteed general power of appointment trusts. Though the couple has funded their trusts with their investment accounts to avoid probate and consolidate their finances, they’re still managing the money themselves.

A Wake-Up Call

This couple and, no doubt, many like them, always had the sense that conversations about their estate plans were really an academic exercise, at last actuarily. At this stage of the game, however, it’s no longer academic. Like many of their friends, this couple has had a catharsis, which comes from the Latin meaning “wake-up call.” Says one spouse, “We’ve never seen a reason to pay someone to manage our money. And, it’s always been one of our hobbies. But we now have to acknowledge that it’s become too difficult and stressful. Beyond that, we’re frightened about losing the ability to manage the money before we realize that we’ve lost it. So, here we are, back in your office.”

They go on. “We think that, based on what we understand a “real” trustee does, we’re at least several years away from needing one. But, we’re ready to turn the investment management over to a professional. We’ve done some research and talked with friends about this transition. One of the things we’ve concluded is that we’d prefer to use an investment manager that is, in fact, also a trust company. That way, transition from pure investment management to full trusteeship can be seamless. If we use an investment advisor that’s not a trust company, then transition to a trustee wouldn’t be seamless and could be expensive, especially tax-wise. And, of course, the transition could happen at a time when we can no longer see the seams! Yes, we know that some investment advisors have relationships with trust companies whereby the advisor can still manage the money but the trust company does the administration. That could be a great arrangement for some, but we think it’s too complicated for us.”

The couple has identified three corporate trustees that they’ll interview next week. Today, the couple is meeting with the estate planner to talk about preparing for those meetings.

An Ounce of Preparation…

“First,” says the planner, “Let me ramble a bit.” “We always do,” says the couple.

“Based on what clients have told me over the years, anything that you can do to prepare yourselves and the trustees for the meeting will help make the conversation more  productive. I’m sure the trust company has already asked for some financial information, like a list of your investments. They’ll need that to get an idea of the kind of portfolio they’d be taking over and the investment and tax issues they’ll have to work through to get the portfolio under their management. You know, maybe there are concentrated stock positions or some illiquid asset that presents unique challenges. Whatever. They’ll need to know that. But there’s a whole lot more to get on the table than the numbers, even for an introductory meeting.

This meeting is really all about chemistry. It’s about how comfortable the two of you are in the trust company’s setting. It’s about how comfortable you are with handing over the management of your money to strangers, however affable and professional they may be. It’s about how confident you are that they hear you now and will continue to hear you as your situation, needs and concerns evolve over time.

Anyway, the more you do to prepare for the meeting, the more knowledge you’ll walk away with and the more you’ll know if that chemistry and confidence you feel is well-placed or the lack of same is equally well-founded. Also, because you’ll have standardized your preparation for each of the three meetings, you’ll have a solid base for comparison and decision.”

The Prep Sheet

So how should you prepare? I suggest you put together a “prep sheet” that’s one-part “tell” and one-part “ask.” The tell forces you to articulate what an investment manager and, subsequently, a trustee, ought to know about you. The ask enables the trustee to be sure they have the right people in the meeting and then to customize the presentation to meet your needs and expectations.

The Tell

Here’s the tell, more or less along these lines, but told in your own words:

    • Our personal, financial and family situation.
    • A high-level overview of our estate plan. (Attach that summary/diagram of your estate plan that I prepared for you.)
    • Our primary objectives/concerns are to not outlive our money and to have a structure in place to deal with the challenges of aging, diminished capacity, elder care, etc.
    • We aren’t concerned about leaving a legacy or planning for estate taxes after the death of the surviving spouse.
    • Our investment risk tolerance? Let’s just say that we want to eat well and sleep well!
    • Note that we’ll have visited your website to become familiar with your organization, its history, leadership and functional specialists and your services and the philosophy behind your delivery of those services. We’ll also have tuned into your recent investment commentary. So, no need to devote time to those points at our meeting.

The Ask

Here’s the ask, again more or less along these lines and in your own words. Don’t worry about phrasing your questions with the right terminology or even in the right order. They’ll know what you’re talking about and will respond accordingly.

    • How does the relationship start, whom do we work with, what services can we expect from the team?
    • What are the steps in portfolio construction and who’s involved, that is, our team, centralized investment managers or both?
    • What types of investment vehicles are primarily used, that is, individual securities, funds, exchange-traded funds, etc.? Who selects and monitors the list of investments?
    • Just based on what you now know about us and our financials, how would you characterize the portfolio that you would construct for us?
    • What’s your investment performance for that type of portfolio?
    • How would you coordinate our income tax considerations into your portfolio management?
    • What’s the expected timing and methodology of transitioning our current portfolio to the portfolio you construct? How would you take the tax implications of the transition into account?
    • How frequently and through what medium would we meet with you?
    • Can you show us sample periodic and year-end reports?
    • Can you demonstrate your online platform or client portal?
    • Though we don’t expect this to happen for several more years, what’s involved when you succeed us as trustee? How does that work? To the extent that any distributions to us are discretionary on your part, how does that work?
    • What services do you provide when, for example, we can no longer handle basic financial affairs like checks and balances, or we need to move into assisted living?
    • What are your fees for the various levels of service?
    • What else should we know about you? What else do you need to know about us?

Put the Ball in Their Court

“Once you’ve completed the prep sheet, send it to each of the trustees well enough in advance to enable them to share it with those who will attend the meetings. By the way, I have my own opinions about what I think you should listen for at the meetings and how you should read the body language of those around the table. But I don’t want to influence you one way or the other. So, let’s plan to regroup when you’re ready to share your observations and conclusions.”

The couple gratefully acknowledges the planner’s advice and counsel. Now they’re anxious to get to their homework assignment!

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