The Psychological Education Of An Estate Planner
by Jon J. Gallo
In her column this month, my wife Eileen introduces a three dimensional model of money relationships. This model examines our relationship with money in terms of acquisition, use and management. For the last two years, I have been using Eileen’s model in my day to day estate planning practice as a means of helping clients select planning techniques with which they are comfortable. But using the money model has been only one of the changes that have occurred in the way I have started to approach estate planning for my clients.
For most of my thirty plus years in practice, I viewed myself as a teacher, whose job consisted of four functions:
1. Obtain and analyze the necessary financial data.
2. Determine the techniques that can be used to transfer the client’s assets to his or her intended beneficiaries in a tax-smart manner
3. Present the alternatives to the client in such a manner that the pros and cons of each is clearly revealed and the client is able to make an informed decision.
4. Implement the client’s decisions.
This all began to change when Eileen started her study of the psychological impact of sudden wealth that she described in her last column. Books and studies on the psychology of money began to fill her home-office and spread to the rest of the house. Our conversations began to revolve around the study and each conversation brought new insights.
One of the earliest insights had the greatest impact on my practice: Eileen’s use of the Holmes-Rahe scale in her study. In a famous study in 1967, Dr. Thomas H. Holmes and Dr. Richard H. Rahe created a do-it-yourself stress test. They developed the Social Readjustment Rating Scale (SRRS) which identifies and ranks key stressful life change events in five major aspects of life adjustment: health, work, family, personal, social and financial. The 1967 Holmes-Rahe life change list contained 43 events. A revised list contains 71. Each event was given a point score. You added up your cumulative score and the SRRS predicted the likelihood that you would experience a stress related illness or accident within the next two years.
And what are the top five, the five most stressful events that can happen to you? In order they were (i) death of a child; (ii) death of a spouse; (iii) death of a sibling; (iv) death of a parent; and (v) divorce. I began to think about what was typically covered at the first estate planning meeting. As part of my paradigm view of myself as a teacher, I’d provide a simplified overview of the estate, gift and generation-skipping tax systems that we had to deal with. We’d look at the various types of marital deduction arrangements (that’s No. 2, death of a spouse) and as the former