In fact, their unique needs—and their growing numbers—demand attention
Handing down your accumulated wealth to your children is a long-held tradition that many consider a cornerstone of the American dream. But what about those individuals who, whether by choice or due to circumstance, do not have direct descendants to whom they can or want to bequeath their estates? Such clients are a steadily growing percentage of those seeking planning today. They have their own dreams and goals that often require unique, “outside the box” solutions. The growing segment of the population that does not have descendants presents opportunities for estate planning professionals to expand their practices and make inroads with a demographic that will only get larger in the years ahead.
Meeting the needs of childless clients deserves increased attention, as they are likely to comprise increasingly larger proportions of estate planning practices. Today it is not uncommon for this group to make up about 15% of a given practice’s client pool, and this number is higher than just a few years ago. The proof of this growth is everywhere. Recent reports project that the number of elderly people without children will grow steadily through 2050, and studies show more younger women are choosing not to have children. The rise in LGBT couples over the past decade, combined with the increased legalization of gay marriage, has also added more people to this client pool. Increased anxiety about the future availability of healthcare as a result of the Affordable Care Act and the uncertain future of Social Security, Medicaid, and other government care programs is leading more childless individuals and couples to seek security in financial and estate planning. While this certainly bodes well for estate planning professionals worried about whether there will be work for them now that estate taxes are not a concern for most clients, planning for the childless also presents unique challenges as this demographic group faces different choices and can often have more diverse priorities than those with children.
Perhaps most notably, planning for long-term care may be much more important in childless individuals’ and couples’ estate planning. Evidence and logic suggest that rather than focusing on transferring debt and assets or protecting beneficiaries after their death, the childless focus more on lifetime concerns, especially the fear of running out of money. But even these concerns vary from client to client. The more affluent the person or couple, the less fearful they are likely to be about running out of money and thus the less interested they may be in long-term care and asset preservation planning. They are more likely to focus on pursuing their dreams and on the financial planning needed to make that possible. The childless with limited resources are motivated by their relative lack of personal wealth to focus more on long-term care planning. In particular, such clients are growing increasingly concerned with planning for incapacity, as the absence of children often creates significant anxiety surrounding the “who will take care of me when I’m old?” question that all clients ask themselves. Indeed, there are signs that incapacity planning dominates the attention of childless clients more than any other single factor. Estate planning professionals therefore should add emphasis to educating and motivating their childless clients of any age to focus on long-term care planning.
Childless clients’ choices of potential beneficiaries do not follow the “all to descendants” model that is typical of clients with children. While this may seem obvious, its significance is that without natural objects of affection, childless clients may have less motivation to do effective estate planning and that any beneficiary planning they do can quickly become very complex and overthought. The resulting complexity may come as a surprise to both the client and estate planner alike. Without children, a host of potential beneficiaries can emerge—siblings, nieces and nephews, friends, causes, charities, etc.—and clients may change their minds often during the plan development on who will be their beneficiaries and who will serve as their successor trustee or executor. Plan revisions, through changes in beneficiary designations and estate planning documents, are also more common as chosen beneficiaries or chosen fiduciaries pass away or fall out of favor. This upheaval in establishing and maintaining fiduciary and beneficiary designations in an estate plan can get very convoluted and pose unexpected challenges for estate planners, particularly those who use a fixed fee practice model.
Whether they are married or not, childless clients have so many more complexities and ambiguities compared to their peers with children that they have a greater need to consider employing professional trustees. This point is all the more true when considering that childless clients face a higher potential for suffering elder abuse in the later stages of life because they do not have children to protect them from predators. Younger childless clients may not give significant thought to questions of incapacity or elder abuse, but it behooves their estate planning team to make this issue clear to childless clients of any age and, yet again, to consider professional trustees and fiduciaries as a way to provide such protection.
So how can estate planning practices respond effectively to these and other challenges facing their childless clients? In a word, collaboration among attorneys, accountants, financial planners, professional trustees, and insurance providers is the answer. Attorneys can coordinate with wealth advisors to get a sense of their clients’ lifetime resources, their investment goals and successor ideas, and the like. With lifetime considerations being paramount and without children as beneficiaries or fiduciaries, working with insurance providers in particular who supply long-term care insurance makes a great deal of sense for childless clients. Other than great personal wealth, this option is the most desirable to ensure that childless clients can have answers about how their care will be paid for well before they need it. Working with professional trustees can provide similar answers about who will be in charge and who will be protecting assets and successor patterns in times of incapacity and after death. Only by collaborating on these financial and insurance issues can the planning team members have the information necessary to serve their childless clients effectively and keep such cases manageable.
In short, for their childless clients, the individual members of the estate planning team can only provide effective planning by joining forces with other professionals. A whole advisory team is needed for such clients, and each team member has to be on board with the decisions of their counterparts. While such an arrangement may seem unwieldy, the potential for the growth of a practice that employs such teamwork effectively holds the promise of happier clients, higher profits, and added security and satisfaction for client and estate planner alike. This possibility alone makes the growing presence of childless clients in estate planning worth being excited about and taking seriously.
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