When he first came to adviser Justin Fulton of Signature Wealth Advisers in Norfolk, Va., the man was looking to diversify his portfolio away from such a heavy concentration in real estate. But when he suffered a serious health scare soon thereafter, the man’s primary concern became his estate--specifically, whether his heirs were prepared to manage it if he suddenly died.
Although the man had both a will and trusts in place to facilitate the transfer of property, neither his wife nor his three grown children were involved directly in his business.
“They had a very general sense of what their husband and father did for work,” says Mr. Fulton, whose firm manages $3 billion for 170 families. “But these are complex assets that require active supervision and management.”
The issue, says the adviser, was that the tax, legal and administrative information concerning the separate properties were all currently being supervised by different CPAs, attorneys and assistants. What they needed, Mr. Fulton explains, was a way to summarize and consolidate that information. He suggested they create a family almanac.
This almanac would serve as a single resource that would allow the client to provide instruction, organize and simplify the information about his properties by putting it all in one place. The document would not only be a useful reference for the man’s family, but for his business associates, the executor of his will, as well as his trustees.
The man welcomed the adviser’s suggestion and together they began gathering the necessary documents and information. Mr. Fulton first asked the client to organize a directory of his professional contacts, from insurance brokers and attorneys to accountants and advisers. That contact sheet would allow the man’s heirs to communicate with the people involved with every aspect of his business.
The man also gathered the details of his balance sheet, including outstanding debts, to whom they were owed, and who was managing their repayment. After collecting the man’s life-insurance policy, copies of his power of attorney and advance medical directive, the client and adviser turned their attention to the estate itself.
With the assistance of the man’s attorney, they put together an illustrated summary of his estate plan. Similar to a flow chart, this provided his children with a broad visual representation of the distribution of his assets including securities, collectibles, and properties to individuals or trusts. This picture reference was intended to prevent any potential confusion or conflict among his heirs.
Next, they created a summary of the specific real-estate parcels: the estimated value of the property, monthly cash flow, general notes about the tenant, and whether it belonged to an individual, trust, or limited liability company. It also listed potential resources for its management.
For the spaces that housed long-term tenants, he suggested potential property managers. If his wife or children preferred to sell a particular property instead, the man also listed the real-estate agent he suggested consulting.
“None of these were legally binding directives,” Mr. Fulton says. The purpose of the almanac was to provide detail and context that isn’t available in the more formal structure of a will or trust.
The process of creating the almanac took over six months to complete. The adviser and client revise it annually, updating the balance sheet and contact information accordingly.
“The more complex an estate becomes, the more potential stress it puts on the people inheriting it,” Mr. Fulton says. “Creating a resource like this can go a long way toward inspiring confidence in a family that they have something to lean on in their husband, and father’s, absence.”
