This is the first half of a two-part article looking at the process of hiring an estate attorney and why it is so important to get this right.

The following article – kindly republished here with the authors’ permission – is by Stuart Lucas and Josh Kanter. (Details on the writers below.) They examine the steps that family offices and those in wealthy households must take in choosing estate attorneys. Choosing advisors can be a complex process but needs to be gotten right. This article is being run in two parts, with the second to follow next week.

The editors are pleased to share these thoughts and invite readers to respond. The usual caveats about outside contributors’ views apply. Jump into the conversation! Email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

This article provides a roadmap for choosing an estate planning attorney, asking the right questions and making the right choices. A well-designed process will also give you better insights into your own aspirations across the business, financial and cultural dimensions of your family enterprise.

Last year three researchers at the investment firm AQR asked a simple question: “How much is good tax and estate planning worth?”  After a thorough analysis (1), they concluded that over a 40-year period, good planning increased the original assets about six turns more than poor planning. With a starting value of 100 and the same exact percentage investment return, poor planning led to a value of 357; with good planning the value grew to 967. We calculate that incremental return to be about 2.6 percentage points every single year for four decades. And that doesn’t count the “soft” benefits of good planning: incorporating your family legacy, purpose, values, and priorities into your wealth planning, helping to educate beneficiaries as stewards of wealth, and creating structures under which future generations can stand tall and thrive, rather than feel guilty or burdened.

Inspired by their research, we asked: how a prospective user of estate planning services should interview estate planning advisors? How can a prospective client gain confidence that they are making the right hire, for the near term and for years into the future?

We’ve both experienced firsthand the benefits and pitfalls of long-term estate planning. Josh, who is a lawyer himself, defended his father’s estate planning advice all the way to the US Supreme Court… and won. Stuart is a great grandson of the founder of Carnation Company and has both been the beneficiary of good long-term planning and a buyer of good planning advice in his own generation. Plus, we each work with many large and complex family enterprises on long-term strategic planning across business, financial and cultural dimensions, including working with clients and their lawyers to build and execute estate plans. 

Well chosen advisors should have dozens, even hundreds of plans applicable to your situation

When interviewing potential candidates, what you ask will depend on how much your family already knows about what they are looking for, how much creativity and guidance you want from your lawyers, who your other advisors are, and what plans are already in place. For example, we help families to craft strategic plans for their enterprises that cut across governance, business, philanthropy, education, investment policy, and financial modeling to help them define and prioritize their estate planning goals. By the time they begin work with attorneys to create estate planning documents, the scope of the work is more precisely and technically defined. In our experience, most attorneys offering good technical expertise aren’t in the business of exploring these broader, strategic issues (there are excellent exceptions). Your choice will depend on your specific needs and circumstances.  

Whether a lawyer is part of a large, full-service law firm or a small specialist boutique, we believe that the keys to a successful relationship are the experience of the individual attorneys who are advising you and the chemistry that you can build with them. Collectively you will be making decisions and building legal structures that may impact you and your heirs for decades, or even generations. Fulfilling your wishes, while also guiding you to design alternative pathways for your family over 30, 50, 100 years, are key elements to a successful attorney/client relationship in this space. If you’re like most people, you’ve probably had close contact with, at most, one or two fully-developed estate plans. In contrast, your well-chosen advisors should have had exposure to dozens, or even hundreds of plans applicable to your situation, plus the wisdom that comes from those experiences.
    
We encourage anyone who is embarking on building an estate plan and hiring an estate attorney to do their homework and to hire a firm with deep experience in this complex space. You may have existing long-term relationships with business or generalist legal advisers but the trust that you have built in those relationships is not a substitute for specific estate planning expertise and the application of that expertise to your situation and the people you love, particularly as you move up the scale of wealth and into a multi-generational timeframe. Trust and tax law is defined both nationally and state-by-state. As such, you are likely to choose a different jurisdiction than the one you are domiciled in – and there are 49 of those, each with special characteristics that may attract or repel you from each particular jurisdiction. You want an attorney who understands these differences and who can help you evaluate the implications for you and your family, currently, and for eventual beneficiaries years, or generations, in the future. You, your children, and their children will appreciate it.  

Here is a list of key interview questions and brief explanations of what we would listen for in response.

With that backdrop, while you will, of course, want to address traditional details like fee structures and estimates, as well as the existence of any direct or indirect conflicts of interest, here is a list of key interview questions and brief explanations of what we would listen for in response. We believe that the greatest value comes from asking the questions and listening to the answers in real time, ideally face-to-face or on a video call. Except where otherwise stated, we suggest that these questions be asked of and answered with respect to the specific lawyer or lawyers who will form your team, and not on a firm- or practice-wide basis.

1.  Composition, jurisdictional reach and competitive position:

-- How much of the practice of the lawyer you’re interviewing is dedicated to trust and estate work?
-- In which jurisdictions, in addition to the one where the lawyer is resident, do they work most extensively?
-- What differentiates this firm from its competitors in the trust and estates practice?

Ideally, we want the answer to the first question to be 100 per cent. If you’re reading this article, you probably want, need, and deserve someone whose entire practice is devoted to trust and estate work.

The second question is important because while most trust and estate lawyers working with wealthy families should be accustomed to working in their home jurisdiction and nationally, they also likely have their own preferred non-home-state jurisdictions for specific reasons. As such, we tend not to be overly concerned about their state of residence if they meet the rest of the requirements/screens. Their answer to this question should give you a sense not just of the jurisdictions they may favor, but the reasons why they favor these jurisdictions, and the family situations that may be typical of their practice – are family members concentrated in a single state, or more widely dispersed across the country or the world?

The third question provides an opportunity to explore the plusses and minuses of large and small trust and estate practices within a full-service law firm, specialist trust and estate boutiques and sole practitioners. Three areas of particular interest are 1) the benefits of scale versus focus, 2) how to coordinate estate planning with legal issues related to, for example, your business operations, 3) whether the law firm’s risk tolerance when giving advice is consistent with your own when implementing it and 4) how the firm manages the continuity of client relationships that can last for decades when periodic turnover of their own personnel is inevitable.  For example, Stuart’s family has worked seamlessly with the same law firm for over 40 years through four lead relationships. 

2.  Client profile in the estate planning practice

-- What is the median and average range of wealth, and typical number and generations of family members of your estate planning clientele?    
-- Are the lawyer’s clientele characterized by a specific attribute: concentrated positions, active business ownership, financial assets, cryptocurrency, or other narrow profile?

Finding a partner you like and have confidence in is not enough; you want to know how you fit into their practice – in other words, how many of their clients “look like you”? If their practice is mostly $5 to $25 million first generation business-owning families, and you had a $100 million liquidity event a generation ago, that may not be a good fit. Similarly, working with families in the ten-digit stratosphere requires a different mindset than working with a $100 million family.

In very wealthy families, tax, estate and investment planning can often drive one to divide up assets into lots of small bits to optimize tax efficiency and risk management. But governance, capital allocation and overall enterprise strategy requires a comprehensive view. Balancing theoretical objectives and practical solutions and navigating the complexity/simplicity continuum is itself a special domain. If you have a large estate, ask how the lawyer attacks the balance of these different efficiency and complexity concepts.

3. Incorporating purpose and strategy:

-- What are the essential near-term and longer-term priorities in an engagement of our size?  
-- How does this lawyer discern/distill/define the client’s priorities?  
-- How do they incorporate the client’s priorities into their process, matching technical solutions with family values and dynamics?
-- Do they have an overarching philosophy regarding dynasty and other generation-skipping trusts’ design, and jurisdiction selection for these entities? 

These questions are designed to understand whether the lawyer is focused merely on tax minimization or whether they have a process to understand and incorporate family purpose, values, governance, family enterprise design, and other priorities. If they don’t, you may want to pair their technical excellence with one or more other advisors who will challenge you to think about these strategic, philosophical, and generational wealth issues. 

When we are getting to know a family, we discuss these core issues. This often leads to conversations about multi-generational educational funding, or some form of a family bank to support valued interests, activities, philanthropy or entrepreneurship. But then, when we review the same family’s legal documents, we often find that these important considerations are not addressed. Listen for how attorneys emphasize tax minimization, avoidance of probate, asset protection, and the usual “hard” answers, versus their use of terms like governance, stewardship, accountability, legacy, and other related “soft” answers.

Other important factors to listen for include the degrees of freedom which should be granted to trustees, versus specific and constraining conditions imposed by the grantor. In the case of irrevocable trusts, how well will the choice of trustees and the way their voting power in an operating business is allocated across a range of trusts represent the wishes of current and future beneficiaries, especially after the grantor is no longer with us?

How are distribution policies designed and communicated from the grantor to trustees and to beneficiaries? How are the interests of current beneficiaries balanced with future beneficiaries? How much discretion will you grant trustees to address these questions in real time rather than imposing fixed rules in the documents?

These may sound like minor points, but we have seen how overly loose or overly restrictive policies contribute to undermining family businesses and the lives of individual family members, particularly if family communication is not baked into the design and implementation process. As these discussions evolve and are expressed in formal, written documents, it’s critical to think not just about how various provisions could impact family members over the next five to 10 years, but to think about the next 25 to 50 years, or even the next 100 years. In the last analysis, no matter how well documents are written, a poisonous family culture will cause irreparable harm.  

Footnote: 

1, “Integration of Income and Estate Tax Planning” by Nathan Sosner, Joseph Liberman, and Steven Liu; The Journal of Wealth Management, Volume 24, Number 1, Summer 2021.

About the authors:
Stuart E. Lucas is Co-Managing Partner of Wealth Strategist Partners (www.wealthstrategistpartners.com), advisors to exceptional families across their business, financial and cultural dimensions. He is the principal designer of the Private Wealth Management program at Chicago Booth School of Business and author of two books on wealth management.

Joshua S. Kanter is Principal of Josh Kanter Wealth Advisory Services (www.joshkanter.com) providing personalized multi-generational family, business and legal wealth advisory services to his clients.  He is also Founder of leafplanner (www.leafplanner.com), a comprehensive owner’s manual solution to bring the deliberateness of a family office to your family.