Remember when your kids were little and one of the first words they learned to say after “Mama” or “Dada” was an emphatic “NO!” As a toddler, my daughter Gabrielle would march around our home pointing at her baby doll yelling “No! You can’t do that!” It’s obvious that children feel the need to voice their frustrations at being told “No” all the time, so they do this to the family pet or to inanimate objects they feel a sense of control over.
It turns out that none of us like to hear the word “no”, even after we reach adulthood.
Unfortunately, attorneys have a habit of rejecting our clients’ ideas out of hand. This makes for bad counseling.
“No — you can’t just sell that million dollar asset to your son for a dollar and report it to the IRS as a capital loss or as a tax-free gift.”
“No — you can’t have us draft provisions terminating the marital trust if your spouse remarries and expect to achieve a marital deduction on the estate tax return.”
“No — your trust can’t simply direct the payment of a $5,000 per month stipend without first carving out some asset or amount of principal from which to generate the income.”
And on and on.
Rejecting Client Ideas
Of course you’re correct to direct the client away from a course of action that’s likely to fail or that may even fall outside of the law. I’m not suggesting that you do otherwise. After years of practice, you’ve developed an instinctive ability to reject bad client ideas. You may even become frustrated when a client tries to dictate how you should draft his trust.
Keep in mind that your client is merely giving you something that’s very valuable — his intent. He may not be doing it in a way that will actually serve to achieve his intent, but by throwing ideas at you, he’s merely attempting to voice what it is that he would like to accomplish.
When you wave your hand in rejection of his idea, he becomes frustrated. Like the parent who’s only trying to keep the toddler away from danger, you may sternly and emphatically deny the very thing that he hopes to realize when your work with him is complete.
But that’s the wrong way to deal with the gold mine of information that your client has just laid down at your feet.
Ask a Simple Question or Two
When you treat these seemingly bad ideas as significant information seeping into your client’s wishes and desires, you may even be inclined to approach his bad direction differently.
What if instead of voicing an outright rejection of the ideas that you know won’t work, you instead ask a few simple questions: “What are you trying to accomplish?” “Why is it important to you to do it this way?’
The conversation might look something like this:
“Why do you want to make this million dollar gift to your son now, during your lifetime? What do you hope to accomplish?”
“Why would it worry you if your spouse remarries after you left the income trust to her?”
“How do you envision this $5,000 stipend being paid? Which assets or money do you see generating the necessary income?”
I’m sure you can see how these answers don’t directly rebuff your client’s idea; rather they demonstrate an attempt through dialogue to reach into his thought process. By examining his mindset you begin a constructive conversation centered on why he’s sitting in your office seeking your advice in the first place.
He also feels heard.
Your Wisdom Achieves Client Goals
The end result of our client conversations is to use your wisdom and experience to help your client achieve as many of his goals as possible. That’s where true value creation arises. By delving into your client’s mindset, you do so in a uniquely positive way. Once you understand where the client is coming from, it’s usually quite easy to direct him to a course of action that will work.
Even where the best tax outcome isn’t possible, given his intent, so long as you communicate that and he’s fine with the result, he’ll be happy.
“I understand your desire to cut off the income if your wife remarries. So long as you understand that the federal estate tax marital deduction isn’t available when you provide an income interest that terminates in any way before her death, I’m okay drafting it that way for you.”
Never the let the “tax tail wag the dog” is an adage that a wise law partner told me almost three decades ago. Sometimes clients want to do things because they want to do things, come hell or high water. So long as they make informed decisions, you’ve done your job, and better yet, you’ve listened to your client and helped him achieve his goal.
Published November 3, 2016 on wealthmanagement.com