The focus in estate planning is slowly but inevitably turning from taxes to people. When I began practicing law in 1967, professionals treated estate planning as a chess game between the IRS and the client. The client won if he or she could send the IRS the smallest possible check for the greatest possible transfer of wealth to the next generation. The effect of that transfer of wealth on the next generation was simply not discussed.

By the late 1980s things began to change. A small group of philosophers, psychologists and estate planning lawyers began writing not about taxes but about the effects of inherited wealth. And perhaps because I was starting to get gray hair—after all, my kids were teenagers—my clients began sharing with me their concerns about the effect that money was having on their children.

"PARENTS [ARE] looking for ways to motivate their emotionally and financially immature 20- and 30-year-olds." --Jon Gallo

My estate planning practice increasingly involved parents looking for ways to motivate their emotionally and financially immature 20- and 30-year-olds. To see if this was a national trend or simply a West Coast phenomenon, my wife (a psychotherapist specializing in the psychology of money) and I polled several hundred estate planning specialists. The responses disclosed not only a nationwide trend but also uniform skepticism over whether estate plans could actually accomplish their desired goals.

One lawyer responded, "To my clients whose children are disappointments, lazy or indolent and fail to live up to their potential, I say that no device that I can draft will make up for lessons that were not learned as a child." Another said, "If parents have failed in their parental duty to provide guidance to children and instill a will to succeed, it is silly to think the parents may delegate the ‘cure’ to a mercenary."

In the years since the results were published, my wife and I have spoken to thousands of attorneys and accountants about estate planning and children. It has become apparent that some estate planning techniques can be used to make up for lessons that were not learned during childhood by presenting young adults with opportunities to become financially literate.

One method is to create a trust, appointing the child as a cotrustee. Your child and you should treat the situation as a financial apprenticeship. Assemble a team consisting of your CPA, financial advisor and attorney to help your child create a budget and learn the basics of investing. If you have set up a private foundation or a donor-advised fund at a community foundation, involve your children; let them learn that there are uses for money other than just spending it on themselves.
 
Jon Gallo, Greenberg Glusker Fields Claman & Machtinger, Los Angeles

Though virtually all of my clients are interested in learning about the latest sophisticated techniques to reduce transfer taxes, their discussions with me quickly turn to the personal, nontax side of estate planning. In particular, my clients ask how to raise affluent children to be ambitious and to have good core values. The prevailing view among parents is that they do not wish to take care of their children forever, but want to set them on a course to lead fulfilling, productive lives. While parents are typically thrilled to be able to get a child off to a good start in life, with a top-tier education and funds to invest in a business or purchase a home, they are less interested in funding an extravagant lifestyle for the child.

"MORE AND more of my clients are setting a ceiling on a child’s inheritance." --Donna E. Morgan

There has been a general recognition among parents that giving children substantial wealth may not truly benefit them in the long run. More and more of my clients are setting a ceiling on a child’s inheritance so that the child will be motivated to pursue an education and a career. Also, there is less secrecy about finances among families, so that even college-age children are involved in family meetings with advisors or have a say in which charities or causes the family foundation should benefit. This early exposure to financial matters, and the accompanying sense of being at least partly responsible for the family fortune at an early age, has proved very beneficial.

Thoughtfully drafted trusts can also help to steer a child’s life in the right direction. In this regard, clients often suggest that their children receive only matching distributions from a trust, meaning that the trustee can distribute an amount equal to the child’s earned income and nothing more. That is a bit extreme, however. There are many admirable careers such as teaching and social work that do not generate a high income. A child may wish to be a stay-at-home parent. A child may become ill and unable to work. Thus, I caution my clients against such rigid standards. Upon reflection, parents usually opt for a trust that either pays the child an annuity for life or permits withdrawals by the child of certain amounts at certain intervals—say one-third at ages 30, 35 and 40.

I expect that all parents, regardless of their financial circumstances, get a true sense of satisfaction if they can provide a terrific launching-off point for their children so that they may lead fulfilling lives. For affluent parents, the tax savings that can be achieved by using certain techniques to accomplish that is often viewed as a bonus.

Donna E. Morgan, Mayer Brown, Chicago

To paraphrase Warren Buffett, how do clients know when they have left enough to their children that they can do anything that they want, but not so much that the children can do nothing? It is a difficult question that clients of substantial wealth must ask in consultation with their advisors. I believe parents have a responsibility to raise their children in a loving environment, to instill confidence and to provide the best possible education in order to increase their likelihood of becoming productive members of society. However once their child’s education is complete, there should be no moral or ethical imperative requiring parents to leave their wealth only to their offspring.

"ONCE THEIR child’s education is complete, there should be no moral or ethical imperative requiring parents to leave their wealth exclusively to their children." --Todd M. Villarrubia

We have assisted numerous clients in working through the myriad issues that are involved when a client has little or no contact with the child, when clients have some children who work in the business and others who do not, and when clients feel that some of their wealth should be set aside for other important objectives, such as charitable causes. We are seeing an increased use of testamentary trusts that are established for the longest term allowed by law, so that the client’s wealth can be held in an asset-protected environment, and so that the wealth can be better managed for the benefit of the benefi-ciaries. We are also seeing the increased use of private foundations and other charitable-planning vehicles for clients who believe that they have wealth in excess of the amount that their children would reasonably need. We all know people who have worked hard to establish their business at the cost of spending time with their children, and we are all familiar with the difficulty some of those children have in appreciating the effort that went into creating such wealth.

Unfortunately, when a client decides to bequeath unequal amounts, children may be upset by the estate plan and attempt to change the terms of the plan in court. We have seen an increase in the number of litigated issues that are being raised in the estate planning arena. Factors include the increasing prevalence of blended families and clients living longer, sometimes with diminished capacity. With an estimated $30 trillion being passed from the baby boomers to their children during the next several decades, this trend will surely increase.

Another troubling issue is the widely held perception that members of the younger generation today are not as respectful of their parents, and are concerned only about themselves. Once children reach adulthood, it is difficult to change these characteristics, and other strategies should be considered. For example, I recommend to my clients that they discuss their plan with all of their legatees. This lets parents explain in their own words why they are undertaking the particular plan that they have decided upon, and helps show their children that they understand what they are doing and that no one has unduly influenced them. Although it is a difficult subject for many clients to openly discuss, I am a strong proponent of the idea that full disclosure can mitigate any problems that may arise when children feel that there has been unjust treatment.

Todd M. Villarrubia, Blue Williams, Metairie, La.

Ensuring that heirs have more meaningful values than the celebrities whose meltdowns dominate the tabloids is the most important estate planning goal. But "How much is too much to bequeath?" is the wrong question. Estate planning is not merely about the transmission of wealth, but about the transmission of values.

"ESTATE PLANNING is not merely about the transmission of wealth, but about the transmission of values." --Martin M. Shenkman

My clients Joyce and Arthur have long been pillars in their community. It is almost a challenge to find a charitable cause they haven’t helped. Their plan is to divide their estate equally among what they refer to as "our four children": their three sons and char-ity. They have never sought to limit what they would bequeath to their children. They have tried to live as examples of the values and warmth they hope their heirs will embody. The care and love their children have shown them corroborate the success of their approach.

Similarly, an elderly couple wanted to divide assets among their three children. The wrinkle was that one son, Sam, was a priest who had taken a Carmelite vow of poverty. Concerned about ensuring Sam’s security in retirement, his mother had a trust crafted to avoid violating her son’s vow of poverty while protecting his future. The love and respect embodied in the mother’s wishes provide a legacy of beauty and values for her son that demonstrates the best of what estate planning is about.

Learning from clients like these, and following in my own parents’ example, I have endowed charitable gifts to several charities using life insurance. This enables me to demonstrate—currently, not only later in my will—to my sons the importance of charitable giving.

Twenty-five years of learning from clients has repeatedly demonstrated that the correct question in estate planning is not "How much is too much?" but rather "How can I set an example and provide a mechanism to guide my heirs to the right choices?" Carefully crafted trusts—with trustees who understand values, not just money—and the use of private foundations, charitable lead trusts and similar techniques help. But the most vital ingredients are living as a positive example and giving unconditional love.

Martin M. Shenkman, Martin M. Shenkman P.C., Paramus, N.J.

Worth’s Top 100 Attorneys Methodology
Does your personal lawyer know the latest hands-on approaches to philanthropy? Is that person up on current tax-reform ideas, or familiar with the most sophisticated estate planning tools? If you are about to get married—or considering divorce—does your attorney know about the special challenges faced by affluent clients?

Our Top 100 do. Worth’s editors thoroughly vet nominees for our annual list through a detailed process designed to ensure that those we honor really are the leaders in their respective fields. We begin by asking our readers to nominate attorneys with whom they have had successful working experiences. We then solicit nominations from professionals who regularly interact with leading lawyers: financial advisors, accountants, family office executives and others.

Worth asks each nominated attorney to complete a detailed questionnaire. Based on their answers, we cull those individuals who are focused more on corporate law than personal concerns. We target those nominees whose experience is deep enough, who serve clients with sufficient net worth, and who have the professional affiliations and publishing history to indicate that they could provide extraordinary expertise to a Worth reader.

We also ask more nuanced, probing questions in an effort to discern both the intellectual heft and personal touch of the nominees. We want to know, for example, how they counsel their clients, what qualities they think make a good—or bad—lawyer, and what they think about current trends in their fields. Those with knee-jerk, vague or rote answers are cut; those with the most thoughtful, interesting responses move on.

Finally, we perform background checks. We once again consider client recommendations and work with the American Bar Association’s regulatory service to probe actions that may have been taken against any of the candidates. With this step completed, we compile our list, certain that we are, in fact, honoring the top 100 attorneys in the nation. --Emily DeNitto.

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