Six Myths that Stop Heirless Clients from Estate Planning

Journal of Financial Planning: December 2024

NOTE: Please be aware that the audio version, created with Amazon Polly, may contain mispronunciations. 

Lisa Kirchenbauer, CFP^®, CPWA, RLP, CeFT, is founding partner and senior advisor with Omega Wealth Management (www.omegawealthmanagement.com) in Arlington, Virginia. Currently, Lisa sits on the national board of the Financial Planning Association. Lisa completed her life planning training in 2004 and has been implementing financial life planning since 2005 in her practice with a retainer and assets under management business model. She has served as a trainer and mentor for the Kinder Institute of Life Planning and has published several articles in the Journal for Financial Planning, as well as being quoted in numerous industry and consumer publications. In 2018, InvestmentNews named her a “Woman to Watch” and in 2023, she was named to the Washingtonian Top Wealth Advisors Hall of Fame. In 2024, Lisa was named to the inaugural Best Financial Planners list on Money.com. She has authored the The 5 Essential Skills of an Exceptional Advisor, available on Amazon.com. 

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Estate planning for clients with no apparent heirs can be challenging. Single clients especially may not have their estate planning in order, perhaps due to their uncertainty of who to name to handle their affairs and to receive any inheritance. Some statistics to consider from a recent Wall Street Journal article:

• 20 percent of U.S. adults older than 50 don’t have children.¹
• 50 percent of childless people age 50 and older have a will versus 57 percent of those with children.²

To set the stage for some of the considerations that heirless clients need to consider, let’s meet Deborah. Deborah came to us a number of years ago. As a successful executive woman with no heirs (never married, no children, no siblings, parents deceased), her planning needs were more complex than many of our traditional clients. Often, as financial planners, we tend to focus on the technical considerations when it’s the human/personal side holding up action on planning decisions and execution of documents.

Since we began our engagement while Deborah was still working, the focus was primarily on saving for retirement as an independent woman while also making sure her estate planning documents were in order. As she approached retirement, the planning discussions became a bit more challenging, and we could tell that Deborah was becoming anxious about several issues that began to negatively impact her decision-making and action-taking:

• Who should I name as my heirs?
• Who will make decisions for me should I become incapacitated?
• Do I have enough money to support myself? How much can I spend during my lifetime?

The reality for Deborah was that money was not really the issue. She had done an exceptional job of saving during her professional career and had inherited a significant amount from her parents as the sole heir. Long-term care insurance wasn’t a real need. We had modeled in significant, extended in-home care, and the Monte Carlo analysis was still showing success rates well into the 80 percent range. Yet, she remained anxious and unsure about a more robust spending plan and updating her estate planning documents. So, as financial planners, how can we more effectively support and advise clients like Deborah in this next phase of their lives?

Another client couple—let’s call them Barbara and Bob—also did not have their estate planning in order and had been referred to me by a local charity where they were significant donors. Like many people in this situation, they were frozen when it came to taking action because they didn’t have answers for the questionnaires from any of the estate planning attorneys they had consulted. They had reached out to more than one, hoping for guidance, but were getting stuck on questions they couldn’t answer before they could even talk to the attorney (perhaps a business model shortcoming for estate planning attorneys?) 

Barbara and Bob had served in the military and were used to updating their documents every time they were deployed. Now they were in their 70s, comfortably retired—to the point they were giving away $100,000 a year. The possibility of joint mortality seemed more likely than it had during their military careers. With no heirs but a strong charitable intent, answering the estate planning questionnaires was dumbfounding. As we began a conversation about their situation and concerns, it became clear that, like many clients, they were trying to get their planning perfect and to last for perhaps the remainder of their lives. Unfortunately, there are several myths that keep people from getting their estate planning in order whether they have heirs or not. For the heirless, they tend to run something like this:

• Myth 1: These are the last documents I am ever going to draft, so they need to be perfect and work for every situation that might come up during the remainder of my lifetime.
• Myth 2: I don’t have anyone I can name as personal representative/executor/power of attorney.
• Myth 3: I need to name people who are younger than me as my representatives.
• Myth 4: If I get my will executed, I’m all set.
• Myth 5: (For those with potential estate tax issues) If I give away too much now, I won’t have enough for later.
• Myth 6: Planning for end-of-life considerations is not as important as drafting traditional estate planning documents.

Understanding Estate Planning Myths

Often as planners, we try the “if you don’t do any planning, the government will decide for you” approach. If that works for you, great. In my many years of experience, that often doesn’t work even on families with minor children. 

Any one of the myths listed above can cause analysis paralysis and stop the estate planning process in its tracks. Let’s take a look at how we might help a client navigate some of obstacles.

Myth 1: One-time Planning

In the case of Barbara and Bob, it became clear they were letting perfect be the enemy of the good. They were trying to do their planning one more time. Especially with a couple, most financial planners know that unless they die together, one spouse will need to update their documents. Laws change, people age, assets change. So, the first discussion we had was about seeing estate planning as an ongoing process. There was palpable relief when they realized this fact. From there, things began to open up.

It’s fair to say that in Deborah’s case, tax implications were certainly open to change, and the causes she cared about and people in her life who could make decisions for her might change in her lifetime. Again, setting an expectation that this is not the last time we expect to update documents helped increase her willingness to move ahead with some planning.

In both cases, planners should have recurring tasks in their CRM software to periodically revisit each client’s estate planning. It could be every five years and certainly any time there is a major life or financial change.

Myth 2: No One to Name

Often, initially, it seems the client doesn’t have anyone they can name in their documents because they have no children or obvious heirs. A creative and attentive planner will realize that in most cases, there is someone who can be named for now, even if not forever. In Barbara and Bob’s case, as we discussed friends and former colleagues, they realized they did have people who could be named as successor personal representatives, power of attorney, and even healthcare power of attorney for now. In the case of the successor healthcare power of attorney, the person was 30 years younger, so a good candidate for the future, and was well-versed in the military medical system—even better.

An option that may make it easier to convince a non-heir to take on the responsibilities of settling an estate: executor fees. While many executors don’t take those fees since they are also the heir to the estate, in these circumstances, we may be asking a friend to take on the considerable time and responsibility of settling the estate. Executor fees might reassure a friend they are not just taking on this responsibility as a labor of love but will be compensated for their time and effort. The same is true for trustees. Certainly, professional trustees expect to get paid for their time since trust duties can exist for an extended period of time.

In Deborah’s case, after lengthy conversations, it became clear there were no viable representatives she felt comfortable naming. At that point, we had to consider other options. 

1. Some law firms (better to name the firm, not a specific attorney) will offer to be personal representatives, successor trustees, etc. For heirless clients, picking the right law firm to step in may be a critical consideration.
2. There are firms and trust companies that can be the successor trustee or personal representative.
3. You, the financial planner, or your firm could act as the successor. Most financial planners avoid this option wherever possible, but sometimes it may be the difference between the client getting their planning in place or not. I am personally the durable power of attorney for one of my elderly, incapacitated clients. We waited as long as possible for me to take on this role, and I am no longer the adviser of record for my client; one of my colleagues at the firm is. We each have separate responsibilities. It’s not ideal, but it’s better than the alternative. Her doctor of many years is the healthcare power of attorney—also not ideal, but there have been checks and balances with other doctors weighing in, to protect the client.

Myth 3: The Need for Younger Successors/Representatives

As we were discussing successor decision-makers and personal representatives with Barbara and Bob, there was a hesitancy to name someone older than themselves. Again, they were trying to do this planning once and assuming the most likely scenario was to die together. The potential successor couple they had in mind were in their 80s but were sharp, financially adept, and trustworthy. At that point, I reassured them it was good enough to move forward.

Myth 4: Estate Planning Is All About the Documents

Many clients think once they get their documents in order, they are all set. Barbara and Bob were no exception. We discussed the importance of following up the planning with any necessary retitling and beneficiary designation changes—especially important as they were naming charities (12!) as contingent beneficiaries. They did not understand that the beneficiary designations would supersede whatever their will said. A good discussion ensued as they started to understand what “estate planning” really entails.

   For Deborah, as a single woman with significant wealth, titling (perhaps a revocable trust to deal with incapacitation issues) was even more important. Clients are often just focused on death planning and not “what if I am incapable of making decisions, but still alive?” For heirless clients, an essential discussion is around the various scenarios that may happen prior to death that need some contingency planning (also see Myth 6).

While much of the focus in estate planning is on planning for death, most planners know there are other related considerations, such as planning for diminished capabilities or incapacity. These considerations are often overlooked by clients during the estate planning process and can be an essential part of the planning work. Talking through some of the questions listed below can help the planner align the client’s accounts and documents with their wishes:

1. Is it important to you to find the best support/care in your home only? Are you willing to make whatever financial/housing/care choices necessary to facilitate that desire, including bringing people into your home on an ongoing basis or spending more money (than in a community/facility) to make it happen?
2. Who would you trust to make healthcare decisions for you during your lifetime and perhaps for an extended period of time?
3. Who would you trust to make financial decisions for you during your lifetime? What would be important for them to know about your priorities for spending: housing, charitable, care?

The savvy planner will realize the first two questions should have been properly addressed when putting together the durable and healthcare powers of attorney and yet, often those documents are just legal documents that do not communicate any of the client’s desires, wishes, and priorities. In addition, clients often have strong views about where they might receive long-term care but have not really done any planning or thought through what it means to have something like 24/7 care at home.

Myth 5: Misguided Largesse 

This is where estate planning and retirement planning tie directly together. Heirless clients often know they will never outspend their assets but struggle with adding lifetime charitable giving to their planning because of a fear of running out of money. Even wealthy clients such as Deborah struggle with this seemingly obvious issue. How do we solve for this concern from a technical and human standpoint? It’s often easier as a financial planner to go to the technical side and run endless Monte Carlo simulations to reassure the client they have enough money to give away assets during their lifetime. Yet, often the issues getting in the way of the client taking action and doing their planning are on the human side. A few ideas to consider:

Human Consideration 1: Acknowledging the concern and fear. Involving the client in the planning to balance financial security and a comfortable lifestyle with meaningful lifetime giving versus leaving a large amount to charity at death, creating positive impacts the client will never get to see.

Human Consideration 2: Being aware of any biases you, the financial planner, may have about lifetime versus after-death giving and financial security. Perhaps one of your parents ran out of money? Are those concerns and biases impacting your advice?

Human Consideration 3: Taking the time to do some life planning to help the client articulate the importance (or not) of having an impact and charitable giving before modeling it in the planning software. If charitable giving isn’t important, we need to let it go except to determine a possible heir for their money in the future. If it is important to the client, anchoring it on the life planning side in a deep and meaningful way can help make the technical case for lifetime giving. This is also where planner biases around charitable giving or giving money to the government in the form of estate taxes could get in the way of client-centered advice.

Technical Consideration 1: Using Monte Carlo probabilities. Solving for 70 percent or “safe spending” analyses may solve for leaving money left over but shortchanges the client’s ability to spend more freely during their lifetime, whether on themselves or charity. Often, it pushes their underspending button, which is not the best or most meaningful planning we can do for a client. In some cases, solving for 50 percent may be enough.

Technical Consideration 2: Planning for significant expenses for care (in-home or otherwise). This is a very important issue and will need perhaps more significant resources than for a married couple or person with heirs. Given the cost of 24/7 in-home care can reach as much as $240,000 per year,³ regardless of where you live, planning for this cost can impact a client’s retirement planning. That said, you don’t want to scare the client or encourage underspending. Rather, you want to strike the right balance of making an educated and empowered decision.

Technical Consideration 3: Leaving the residence or some real estate out of available retirement assets to allow a buffer. With clients with no heirs, we are doing them a disservice when we leave too many assets on the table at death. Trying to solve for spending all investment assets during the client’s lifetime while leaving this buffer of real estate as their long-term care solution, while also solving for a lower Monte Carlo percent, may be another option. This is where the art of financial planning comes in.

Technical Consideration 4: Solving for greater spending and gifting during the client’s lifetime while periodically revisiting assumptions. It may seem obvious, but this is a way to help allay the client’s fears of running out of money. Mid-course corrections are easier than having to make a major life/house/spending change at 80.

Myth 6: Failure to Plan for End of Life

Often, much of the focus for the financial planner and client alike is on the estate planning documents, titling, and beneficiary designations. Without heirs or close friends, the end-of-life wishes may be even more important to articulate and document. Resources such as 5 Wishes allow a client to very clearly specify many of their unique end-of-life wishes that can support a peaceful and dignified death.⁴ While not easy territory for many planners to tackle, these issues are some of the most meaningful work you can do with your clients.

Other Important Considerations 

There are a few other considerations to help make estate planning for heirless clients more compelling and flexible:

• Naming a donor advised fund (DAF) as the beneficiary of assets rather than specific charities. Changing a beneficiary form is much easier and more cost-effective than having to go back to the estate planning attorney for a new will or trust document or amendment. Charities’ missions change, leadership changes, and clients often change their minds about who should benefit from their generosity. Naming a DAF as beneficiary makes that easier. Worst case, if they do not know who to name as successor donor, they can often name the foundation under which the DAF was created as beneficiary.
• Considering the use of a charitable remainder trust (CRT) as an alternative to an outright donation to a DAF or charity. The CRT still provides a current income tax deduction and a future gift to the charity of their choice, but it provides an income stream during their lifetime. Often this additional benefit can be the difference in the client taking action on their planning and giving efforts. This income stream could become a resource for care costs or additional spending. If the client is unsure about the charity they want to benefit from the CRT gift, create a DAF and use the DAF as a beneficiary. 
• Authorizing access to digital accounts to control nonfinancial assets. More often today, we are seeing estate planning attorneys include language on the management of digital assets. While access privileges are not consistent from platform to platform, this issue of access may be especially critical for single clients with no heirs (the assumption being that married clients with no heirs will have a survivor who can manage the emails or social media accounts). As one of my colleagues mentioned to me, if you give your executor access to your digital assets, are you comfortable with what they may see, especially in terms of emails? Is there someone else you trust, and if not, do you just let your digital identity pass into the ether? These aren’t easy questions for your client, but they’re worth contemplating and discussing with their attorney.

Helping heirless clients complete their estate and other planning can often be an arduous process that leaves the client with incomplete plans and the planner feeling less than useful or even frustrated. Acknowledging the unique issues involved, making sure that we are not being biased in our advice, looking for creative ways to get the client to “good enough for now,” and seeing the work as a process, not an end, can make all a difference. As we continue to see more clients choosing not to have children, the possibility that we will all be working with more Deborahs, Barbaras, and Bobs becomes more likely. 

Endnotes

1. Minkin, Rachel, Juliana Menasce Horowitz, and Carolina Aragão. 2024, August 14. “The Experiences of U.S. Adults Who Don’t Have Children.” Pew Research Center. www.pewresearch.org/social-trends/2024/07/25/the-experiences-of-u-s-adults-who-dont-have-children/.
2. Thayer, Colette. 2021. “Solo Agers: Attitudes and Experiences.” AARP. www.aarp.org/content/dam/aarp/research/surveys_statistics/life-leisure/2021/solo-agers-attitudes-experiences-report.doi.10.26419-2Fres.00428.001.pdf.
3. Paying for Senior Care. 2024, January 22. “How Much Does 24/7 In-Home Care Cost?” www.payingforseniorcare.com/homecare/paying-for-home-care/cost-of-24-7-care.
4. Visit www.fivewishes.org/ to learn more about the organization.