Unger Company president Harold Unger was featured on an episode of The Family Office Success Podcast. Harold joined host Christi Van Rite and his long-time friend and colleague Norman Ross to discuss estate planning strategy successes and failures on an episode titled “The #1 Mistake Advisors Make: Assuming the Plan Will Work.” The discussion, which you can see or listen to via the link below, is a lively and entertaining recollection of case studies that Harold and Norman have worked on during their combined careers of more than a century serving clients in the life insurance, estate tax mitigation, and estate consulting business. We are also providing a transcript of the conversation below.
TRANSCRIPT of the episode: The #1 Mistake Advisors Make: Assuming the Plan Will Work
0:06 Welcome to the Family Office Success Podcast, where we explore the strategies, the insights, and the best practices that help families and their adviserss build and manage successful family offices. I am your host, Christi Van Rite, and each episode, we dive into the key elements of running a family office. Whether you’re a family looking to structure your advisory team for long-term success, or you’re a professional managing the complexities of a multigenerational enterprise. From financial oversight and operational efficiency to selecting the right advisors and creating a lasting legacy, this podcast is here to provide practical guidance and expert perspectives. Let’s get started. Welcome back to the Family Office Success Podcast, where we talk all things family office. Today’s conversation is going to wrap around a number of topics. Insurance, estate planning, general tax planning, you name it, there’s a pretty good chance we’re going to cover it. This podcast is going to be a little bit different from what we’ve done in the past because when I was talking to our two guests today, it really struck me that the information can be given in more of a classroom like setting, but it’s and it’s important information, but the details get a little bit lost when you’re just hearing facts and figures and and um where to go. But when you start hearing the stories and the the reasons behind the information really comes alive. So this podcast is going to be more a conversation slash case study. So I hope that you enjoy it. I hope you enjoy this different format. With that, I would like to introduce our guests today, Mr. Norman Ross and Mr. Harold Unger. Uh, I’ve known Norman for several years now. We met actually because he heard the podcast, which was super cool. Uh, and reached out and we have since gotten to do some work together with some mutual families and, uh, his business partner, Harold. I I have to tell you, uh, guys, whenever we started having this conversation, I I don’t know that I’ve ever had more fun talking about tax and insurance and estate planning than when the three of us got on the call and started like going through stuff and it really worked great here. It didn’t really work here and telling the stories. And dear listeners, I think you will also find that both Norman and Harold are just quite quite funny and entertaining storytellers. So with that, I would like for you gentlemen to introduce yourself if you don’t mind. Just tell the tell us a little bit about where you came from, what got you here now, and then we were we are going to launch into what I know is going to be a fascinating uh storytelling time.
3:10 So Norman, you want to go first? Thank you, Christie. I have been looking forward to this uh podcast interview case study discussion for some time. Uh you’re right. I did reach out to you a few years ago when I heard you on Michael Kitces’ podcast and I was fascinated by what you were doing and thought that clients that I work with and professionals that I know would really benefit by working with someone like yourself who has a very unique business proposition. Um I am a career life insurance broker and advisor. I joined my father’s firm in 1982. I actually got my insurance license in high school. He joined his firm in 1960. The founder of the firm went back into the 30s and was one of the pioneers of the life insurance business. His business partner was a lawyer who gave up the practice of law in the 50s. His partner’s golf buddy was Jack Dreyfus and they actually opened a broker dealer before any bank or insurance company in the country. So our firm had a very unique history. uh we were involved with different types of insurance policies that had securities connections back in the 80s when the products were first evolving. Uh I’ve known Harold for close to 25 years. We belong to a study group composed of life insurance people, trust and estates lawyers, actuaries. That study group has a pedigree going back some 70 years. It’s the oldest study group in the country, which isn’t to say we’re dating ourselves. It’s just to say we are privileged to be part of an elite group of, how should we say, thought leaders. Harold, your turn.
4:57 So, my I’ve been doing this since the early 1400s. My training is as a tax attorney and I’ve been in the insurance and high net worth and ultra high net worth estate planning business for a long long time. uh I kind of marry both fields and so I speak legalese and I also speak insuranceese and as Norman said and stole a lot of my fire actually uh we met at the Yale Club Insurance Study Group and we’ve been working together on cases what’s unique about some of the things I do is many years ago I founded and sold a software company and as a result of that I learned how to program I think I mentioned I would sit behind the programmers which is not an easy task because showers with them apparently were optional. And I learned how to program and uh so some of the uh things that we do we could project on a screen and immediately have the parameters change so people can understand what it is we’re talking about because not everybody wants to read a spreadsheet. So that’s it for me. Here’s Christie.
6:09 Thank you very much. All right. So, we’re going to we’re going to jump in the first uh the first case study that we kind of have talked about is or one of the ideas or the concepts that we’ve talked about is when a family gets good advice and repeatedly I will say rejects that sound advice or that sound planting planning and it has continued over the decades whenever that happens. It’s, you know, hindsight is always 2020, right? We we even talked about this that it’s it’s really unfortunate when a family doesn’t take sound good advice, good counsel from their team of advisors. and we talked about, you know, why you don’t do anything in a silo specifically because you don’t you you need that group perspective. You need the group context. And so when a family has that to start with, but yet they still choose to not move forward with a with a plan. Let’s talk a little bit about um a case or two that you have worked on that looking back using our hindsight uh our 2020 vision how that family the advice they got over the years that they didn’t take and how that has now manifested itself in a current situation.
7:50 Norman, why don’t you start this one as we discussed earlier? So, we’re Christie, we’re going to start with a case or client engagement that you had your hands on, if I can use that expression. One of your other guests on your podcast months ago, uh, actually reached out to me at your introduction of me to her and we began to collaborate with a family. I brought Harold in on the matter because I thought his communication skills would clearly help this family in terms of understanding their issues and then demonstrating different planning strategies. What this this case to me, this engagement to me it’s the Titanic heading for the iceberg and uh it’s a family of means, access to good counsel and advisors and the matriarch has chosen to maintain status quo and there will be a significant liquidity problem for the family in the future because more than half of their assets are in residential real estate. And there’s a desire to maintain the real estate and not enough liquidity. But nonetheless, you know, recommendations from 25 years ago were rejected. Updated recommendations were presented and the matriarch chose not to bring the other professionals to the table for a collaborative discussion. Harold, can you add to that? There was a team of advisors, but apparently the matriarch was unhappy with a large bill from the attorney for some prior planning and decided to keep the attorney on the side. So, we really had no one to talk to to help explain some of the theories we were talking about. And it’s it’s really under the topic of no good deed goes unpunished because we came up with numerous ideas to increase compensation to reduce her interest rate. She had some loans with a bit a large bank who was also a trustee and there was nothing we could do to dissuade her from doing nothing.
10:10 Um, and as Norman mentioned, the problem would be that to maintain the real estate, which is expensive after paying taxes, which would be a big hunk, it’s impossible to do. Norman, do you see any way to do this to retain the real estate? No. No. It’s uh you know this is a family with net worth in excess of $200 million with more than a hundred million dollars of residential real estate of which the family would like to maintain a high percentage of that real estate and artwork too. They want to and artwork. That’s right. And artwork and some very clever planning had been done uh in shifting artwork to the family decades ago. But that valuable artwork will have to be sold also to generate liquidity. So the capital gains and auction fees will be significant. So to me this was a good case where where the family would was not invited to the meetings. The meetings that Harold and I had were only with the matriarch. So not the attorney. That’s right. It the good the advice that was being given was only being heard by one set of ears. Yeah. And the people who really needed to hear the discussion were not invited to the table. And the problem is there are two children and normally each child would get 50% of an estate if the planning is done right or if there’s any insurance in place to deal with the estate taxation which would be on two levels federal and state. So with no planning, Uncle Sam and the state will get at least 45 48% and the kids will get 25 to 30 instead of 50 and 50. So it’s really sad. There was nothing we could do. Yeah, absolutely. That is one where we wanted to bring in counsel because Norman and I are generally brought in by council. So council’s there at the table and council is usually trusted. So the uh the client would look at council and say, “What do you think? And how would this work with my situation?” We had none of that. And we knew all along there was an issue, but we were trying to make it happen. And we didn’t have the it takes a village here. We didn’t have the attorney. Thank you, uh, Mrs. Clinton. We didn’t have the attorney. We had an accountant that was was very rigid and, uh, there was just very sad. Nothing could be very sad. Yeah. Yeah. We will read about this in the papers off into the future. We that is unfortunately if I may that’s that’s actually the case because real estate is going to comprise most of the estate then there’s a fire sale. Yeah. And that will show up in the papers. people will know that this person passed away and that taxes have to be paid in nine months and okay, something’s got to be sold. Yeah. And it’ll be sold at a discount. Yes. Un unfortunately, this is going to be one of those estates that make the paper and not because it’s in fond. Hopefully there will be many things in fond remembrance but that’s not going to be the headline for this particular family which is just uh quite frankly heartbreaking because there still can be things that can be done uh even today. But the I think if to bring this one back around and I realize that we started on bit of a on a bit of a a downer one, but I started with this one because I really want those who are listening to hear what happens when nothing happens. What happens when no decision is made? Uh, this is absolutely I don’t know that I would call it worst case scenario, but it’s not too far off of worst case scenario, but it’s it’s a good example of where the family dynamics, right? This wasn’t an issue of the professionals recommendations. This wasn’t an issue of the professionals not coming forward. The professionals weren’t invited. The family wasn’t invited. Everything was being done behind the curtain like the Wizard of Oz and it’s not going to work out in my mind because of the family dynamics, not because of what the professionals did or didn’t do.
14:45 Yeah, I agree. I agree. So, there’s a few things. So this is a this is an interesting case study um in a lot of ways but as much because I think a lot of times whenever families are having this conversation first of all they don’t always want to have this conversation right because at some point you’re admitting that you’re no longer going to be um walking this spinning ball under the sun. So that’s part of it. Chrissy I got to stop you. It’s never about death. It’s always involved with not adopting two more kids, the state governor and Uncle Sam. That’s the key. And you could walk away from the table saying, “Wow, I just saved a ton of money.” Yeah, I’m going to die eventually. What the heck? But I just saved money. And that’s what these conversations are about. Not adopting a third child or fourth or fourth or however many you have.
15:43 That’s right. Federal and tax. So, you could be adopting two or federal and state, you could be adopting two more kids as part of your estate plan. Uh, yes, 100% correct. That is absolutely, if you are listening, the reason to have conversations is you don’t want to be adopting a couple more kids. But also, I think a lot of people don’t necessarily start these conversations because it’s something that you have to you have to think about. It is planning. There are going to be questions that you’re going to have to sit with and think about, you know, what’s going to make the s most sense for you and your family long term. And yes, you do need to bring in all of your professionals, your investments, your tax, your legal, your, you know, if you are philanthropically engaged and they are doing uh that’s going to be a big part of your estate, those advisors, those practitioners deserve a seat at this table, a part of this conversation right along next to you as the family because they’re going to have additional context. they’re going to be able to see things that could change maybe change the recommendation. Who knows? But if you don’t have everybody at the table, if you don’t give everyone a seat, um that I think I suspect that one of the other reasons why people don’t necessarily think, oh, I’m going to go do my insurance planning or something like that. It’s I have to trust that the person sitting across from me is giving me good counsel. Having all of those practitioners sitting at the table, that’s how you get the known quantity of yes, we are getting good counsel. Not because one person had an idea and this they think this is all you know this is what you should do. This solves all of your problems. but that your team that’s sitting around you that you trust and have hopefully trusted for a long time are telling you this is how this works and this is what the outcome is going to be. So let’s let’s take this case and let’s turn it on its head. How do we let’s say this family? Maybe they didn’t. May what if they took had taken the first round of guidance because as it happens Norman, you actually know what the first round of guidance was many years ago. If a family is in this situation, they are heavy in any asset, any relatively illquid asset. How could this have been different had guidance and counsel been taken? Norman, can I just go ahead say that there are many acronyms for the things attorneys can do. Gratz, CRTs, skins, a whole bunch of things where you give money to the next generation, not necessarily as a gift, and growth occurs in the next generation. Had they done this years ago, it w it could have been a real success because the way Norman and I work is we’ll try all these legal maneuvers to get money out of the estate to reduce the taxation. And if all of those don’t bring it down to an acceptable level, then usually the client would say, and this is my experience, okay, I guess we need insurance to cover the rest. And that’s how we do it step by step. What legals can we do? How do we get rid of some of these assets? How do we give them to the kids yet maybe not have the kids have control? And maybe we could give them to the kids yet we could still get income from it during our lifetime or lifetimes if it’s a married couple. So, we could try all those things and some of those things could have been tried 20 years ago and I’m going to turn it back to Norman in a second, but I suspect it wouldn’t have worked then. Had someone said yes to it, oh boy, would this have been in a state of a totally different color. Norman, go ahead.
19:54 I’m gonna I’m gonna go back and say Christie, if this family had somebody like you as part of the team 25 years ago as opposed to the trusted bookkeeper, there was not enough independent objective advice. The sources of advice were an attorney, capable attorney, a well-known banking institution who was also the trustee and money manager. So, objectivity wasn’t necessarily there. Recommendations were made for a strategic type of life insurance program which was rejected. The matriarch instead elected to acquire term life insurance which is perfectly suitable as long as there is a complimentary strategy. So the matriarch acquired a large block of term insurance that was held for 20 years. But there wasn’t a complimentary strategy that was going to replace the term insurance at the end of the 20 years. So essentially the term insurance or the life insurance was rented for 20 years in year 21 policy was cancelled but nothing was done to fill the gap if you will meaning if they had done grats and clats and some of the other strategies that capable council would recommend to do concurrently assets would have been shifted so that when the life insurance canled assets had moved. So there was a hedge but no concurrent strategy. That was the flaw. Can if I may add Yeah, this what our audience is now crying. We really need to move on to some successful cases. This I would say between Norman between Norman and myself I would say 95% or more of the cases are successful. This was one huge nonsuccess. And so I think we could go over other issues, other cases that would put smiles on people’s faces. Let’s do it. That’s because that’s where we that is where we want to go. I want our listeners to hear a I think it is important to understand things.
22:22 Sometimes you got to hear what what didn’t go well to recognize that you do need to move forward. You do need to make decisions and no decision is usually not the best decision. And so so I think that was an that was important. That being said, let’s go to how things worked. when things worked and when they worked so well that the two of you walked away and you were like, “Oh yeah, that that did it. That was totally worth it.” And we that family is going to be so incredibly happy in the future. So, there’s one that we didn’t discuss. Am I allowed to bring that one up? Norman knows about it. Do it. This was a case of a professional I’m going out of order. case of a professional who lived up north and later moved down south. Not totally down south, but on the way south decided to pick a state and move there. And this was a fellow, a family that had put away approximately $80,000 one time into a qualified plan. And he had good advisors. And that $80,000, no additional contributions, became worth in about 20, 30 years, $40 million. No additional contributions. So, we got in there and we said, “Okay, we’re going to need some insurance here and let’s put some insurance in the qualified plan and later on we’ll roll it out. It’ll be bought by the individual.” So, we did that. Insurance was in the plan. The person retired with around 40 million. We rolled it into an IRA. We had lots of survivorship life coverage. There was going to be no problem. 2008 rolled along and 2008 knocked the beebies out of the IRA. So we said, “But wait folks, that’s a good thing. Let’s move the IRA money to a Roth IRA.” and that would be taxable but you’d have to pay the tax in those days within a year and a half of the rollover. So we did that and then the money started growing again in the Roth IRA and then President T comes along and said I’m going to increase the unified credit and I’m going and increase the generation unified credit to let’s say 10 or whatever it was and then it grew to 15. And then I said to the client, and I always do this on a Friday afternoon. I said, “Take some Tylenol. We’re going to blow your mind here a little bit, but you’ll like me next week.” So I said, “Now we’re going to take the money out of the Roth IRA and make it taxable.” Oh my god. I thought the accountant’s head would explode because he was one of the people that wanted to put the money in the Roth IRA to start with. I said, “Well, look at it this way. If we take the money out of the Roth IRA, it’s not taxable. We could put it into a dynasty trust. We would have no tax on that, no income tax, no transfer taxes, and the transfer tax normally would be 90 plus percent. We did it for zero. And now that money could be parcled out over the next god knows how long, hundreds of years to the next generations with no estate taxes. And then I said, but wait folks, there’s more. Why don’t we then take that money in the dynasty trust and put it back into private placement life insurance and that would mean that the investments would be non-t taxable. Oh my god, that’s going to look like a Roth IRA again and we had no estate, no gift tax moving it from generation one to two, three, four, five, whatever. And did we make money on that case? Sure. We had insurance commissions. We did planning for the child. This is a success. And every time I talk with this particular client, he said, “Please tell the world what happened here.” Okay, I’m done.
26:29 I love it. All right, you’ll win. That was a good one. That was a good one. Uh I love it. Love a good success story. Gentlemen, it’s way better when we’re doing this. Let’s just have this conversation. Norman, give me one that has gone really well over the years that you also were able to use multiple strategies in, you know, in inside this bigger planning because just to bring everybody back and uh Harold, you just you set this up perfectly just now. the it is not about one strategy in a silo. It’s not just insurance. It’s not just a SLAD or a GRAD or a pick your four-letter acronym. It’s a bigger plan and it’s can staying on top of that plan. It’s not just okay, we did it, put it on the shelf and good to go for, you know, for the rest of our lives. But it’s this planning concept. Norman, I know you I know you got one in you.
27:40 Give me one that I have a couple. I have to think of one that fits your criteria. Um I’ll I’ll talk about an active case that goes back almost 20 years when I first met the family. Okay. A well-known national re retailer contacted my father. He was known as a compensation consultant. There was a compensation issue with this family business. We were brought in. We were hired. We did an ESOP study. The non-family member CEO didn’t like the idea of the ESOP because his compensation package was driven off of growth of the business. He called the private equity firms. The private equity firms started circling and uh the private equity firms were offering twice what the ESOP valuation was. And the family patriarch said, “What should we do?” And the response was sell. But before the letter of intent was signed, we had brought in one of the national trust companies and persuaded the family to set up Delaware defective trusts before letters of intent were signed. So they family made gifts of significant percentages of their ownership as a business. When the deal was done, the family saved on New York and New York City capital gains taxes in excess of $40 million just on capital gains taxes. Um, so that was almost 15 years ago. I continue to work with the family. I I have become aside from being an adviser, I’m also a trustee. the planning that’s been done over the years has had me at the table on a regular basis where I’m coordinating with uh the other family advisors, you know, without getting into the details of yes, there’s insurance and yes, there were grats and CRTs and you know, used to mitigate capital gains taxes when credit lines were being paid down. So, there’s been a lot of planning over the years with the professionals, accountants, the lawyers. there were that we took a step years ago to make sure that the next generation was educated about respons responsibilities of wealth. So we brought in a wealth advisor who is not in the wealth management business as a coach. So I’ll call that a good story where the pieces got put together and continues over time. I hope that fits the criteria. It does. May I add May may I add something to that? Yes, please. If you play back this conversation and you think Norman and Harold get fees but also make their money from insurance commissions, what percentage of this conversation was around insurance? I’ll answer maybe 10 or 15%. It was all about the planning and then when this that planning doesn’t work out totally. It was good planning but it doesn’t cover anything everything then the insurance uh comes into place.
30:45 But there’s two things I want to add, and this is something Norman and I are always alert to. Tax laws are written in pencil with big erasers. And people today think that, oh my god, we now have 15 million. That’s going to be it from now into eternity, whenever that is. Eternity may be if you follow something called political life expectancy. Political life expectancy is let’s say you’re 46 and your mortality 48 and your mortality is 88 that’s 40 years divided by four that’s 10 presidential elections where laws can change dramatically so that’s why Norman and I are always on top of this because things can change radically and grandfathering isn’t always available so I just wanted to get that in the pencil. And the erasers are used all the time.
31:40 Yeah. Well, yes. I mean, we we do see that. Um I think probably anybody listening can think back just over the last 10 to 15 years. If you did your if you did your estate planning and you were do using your your lifetime exclusions and all of that kind of stuff 15 years ago, you need to go back and look at it again because things have changed. And so going back to this is not a do it one time, put it on the shelf. This is something that you want to be continually engaged with. Uh no matter what it is, whether there’s insurance involved or whatever tools you’re using.
32:20 I’m going to interrupt you, Christie. Thank you. I’m going to interrupt you and give you something that we’ve used in our firm over the years. Okay. Number of times. We called it a uh financial fire drill where we would bring in the matriarch, the patriarch, the other advisors and then look at either the matriarch or the patriarch or both of them and say regrettably you passed away yesterday. Let’s test how everything flows. And rather than reading documents, it becomes an oral discussion of how everything moves. And very often in reading documents the understanding of how the flow of funds and to who the funds are moving or assets being transferred it may read one way but when you speak to it much like a dress rehearsal it’s heard very differently. Yes it is. And I can think of many client engagements where things changed as a result of the fire drill because when the family members heard the description of how assets transferred or who receives what, the wakeup call comes about. Reading it kind of there’s not enough animation to it. There’s not enough feeling. And this is all emotional stuff. And I’ve said to more than one family, you know, you probably spend more time planning your vacations than you do reviewing your planning. And usually they’re offended, but then they agree because family vacations do take a lot of planning. They do. But you know, this to me is the essence of it. Are do you have what you want and do you want what you have? And very often what people have isn’t what they want. And rather than address it, it gets put on the shelf. And that’s really where these things become problematic. Yeah. I love that you brought up concept.
34:15 Go ahead, Harold. So, we have a client and talking about watching things and things that may have been good day one, not good day two. We have a client that’s a money machine. His net worth is well in the nine figures after tremendous gifts to the kids. Tremendous gifts. And they grew dramatically. businesses were gifted when we knew maybe five years from now they’d be sold at a multiple so the gain went to the kids not to the parents and we knew we needed insurance so we bought a large amount of insurance and we premium financed it which means the bank paid it and they paid interest to the bank well in those days the client was earning 12% the interest rate was one or two% then what happened is times have changed the client was earning four or five percent there was some bad years and the bank now was up to seven, eight or nine%. I said, “Oh my god, we’ve got to do things.” But part of the planning was that we had sufficient assets to always deal with these changes. And the last bit of this change is the client is now earning 12%. We were going to pay off the bank loan, which is still 7%, but the delta instead of being 10% then a negative is 5%. So he’s not paying off the bank. So, one needs to pay attention. And I’ve been working with this client for 30 years. And it’s amazing how he could turn, I don’t know, a piece of paper into money. Whatever it is, he can turn it into money. So, we we keep on telling him, you’ve got to stop doing this. But the net worth this past year went up 30%. Wow. You have to watch this. You have to be part of it. This is what Norman and I talk about all the time. Yeah. Well, and that’s why running the idea of the fire drill. We do this periodically with our families, not I mean on a on a bigger scale, you were on the boat yesterday and you didn’t come back into port and now suddenly how are things going to shake out? Who’s locking the house down? Who’s taking over the various, you know, things that that you’ve been doing? This idea of a fire drill really cuts across all areas of a family’s life, literally, and is so incredibly important to do. And again, goes back to why you have a team of adviserss and why you have them come together and work together on a consistent basis because these kinds of things need to be updated regularly. I I think just to add to your observation that very often there’s an expectation that let me speak to the professional separately. Let me get their objective viewpoint on any particular planning strategy, technique, asset, whatever it is. And I would liken it to running an investment portfolio where you’re not necessarily looking at all the asset classes at the same time. You know, one’s going to go up, one’s going to go down. Keeping the professional separate denigrates the outcome. It doesn’t improve it because professionals have their own professional biases. Professionals generally have an understanding of the other’s lane though not try to be in it and it’s that pushing back and forth where you get the best outcome. It’s a team effort. It’s not solo efforts. When it’s solo efforts you’ll you may have wins here and there but it’s not cohesive. Yeah. Unfortunately, we have found more often than not that siloed efforts create less than optimal results almost across the board because when everybody doesn’t have context, they can’t give you the best information. So, if if you are a family listening to this podcast, if you hear nothing else from us today, I hope you take away having all of your advisors at the table, consistently talking and communicating, and you are going to get so much better advice across the board to support your family. I think you’ll be shocked if you’ll let the process play out just how good your adviserss really are and how good they can be for you quite frankly.
38:51 So Harold, you look like you got another story for me. If we may add one thing and Norman join in with me on this one, please. Uh insurance is not something that you put in the vault and forget about it. Things change, companies change, needs change, companies go out of business, insurance policies don’t perform as they’re supposed to. So part of this, that’s an asset. You got to watch it. Norman, you want to chime in? Oh, absolutely. The observation Harold just made about companies going out of business, that’s real. Uh that’s a real issue. And some of the companies today are survivors or they are part of a conglomerate of companies that Metife or other big insurers acquired over the years. Doesn’t mean they’re bad, but it just means that things are different. Many private equity firms today are acquiring small insurance companies. It’s not necessarily bad, but it’s different. So an insurance portfolio when a family has one it needs to be monitored it needs to be managed circumstances change cash flows change the Harold described the family the money maker that insurance program is closely monitored and you know there’s always stress testing that’s going on so it’s an asset that needs to be watched and today with longevity continuing to increase programs that were put in place 20 and 30 years ago ago may be very fragile when the patriarch matriarch is now in their 80s or 90s. Do we make changes? I have clients that feel they don’t need the insurance anymore for whatever reason and we’re selling policies that are worth zero on liquidation but being paid millions to sell the policy because pension funds and private equity funds want to buy these policies as a non-correlated investment asset. So there’s lots that can be done with uh managing these insurance programs. It’s not it’s not an expense. It’s an asset that needs to be managed.
41:07 I teed that one up nicely. Right. You sure did. Um I Okay, so that is another If we’re pulling sound bites out of this insurance is not a what? Tell me again how you said that Norman. It’s not static. It changes. Companies change. Needs change. A lot of things change, but it needs to be managed. That’s true. I think I think you know just to go from another angle, Harold a few minutes ago mentioned private placement life insurance. Private placement life insurance is getting lots of attention. It’s not new. I did my first private placement insurance program in 1990 and it was actually for a law firm where we insured more than 100 partners and we had to get an SEC no action letter because we didn’t want it to be treated as a public offering. What is private placement life insurance? It’s a life insurance policy where the policy owners have a choice of investments that may include hedge funds or other uh assets within that specialty category that were generally only available to sophisticated investors. But those programs need to be managed, right? The investment manager may fall out of favor. he or she was doing 12% for five years and now they’re going negative. Where do we go? Do we are there other investment choices available within the platform? Do we make changes? Those policies that I placed 30 years ago, I paid death claims. I’ve exchanged policies. Things happen. And sometimes it’s not because anybody did anything wrong, but very often it’s circumstances change. Right now, this is these are all important topics. And how do you explain it to the client? That’s the part I alluded to earlier where we can and I think you’ve seen this Christie, we showed it to you, didn’t we, Norman? Where we can actually portray on a screen changes, uh, if the rate of return changes, if various things happen, so someone could actually see it within a matter of a second or two doing literally thousands of calculations. That’s important because a lot of times people can’t imagine what it is we’re talking about and you have to put it in a way that it’s comprehended, right? Because if it’s not comprehended, there’s no action. It’s not going to get moving forward. They agree. They agree. The dog agreed with that. The dog agrees with you.
43:53 Okay. So, as we
as we wrap up today’s conversation, there may very well be more in the future. So, if you’re listening to this
and you want more stories, more topics,
let me know. Put put it in the comments so we can so we can know what you’re what you’re interested in because again, I think stories do more than just facts
and figures. Um, and by the way, Harold, that is a beautiful spreadsheet that you have at from one spreadsheet nerd to
another. It’s really, really beautiful. Give me your your parting thoughts. If
someone is listening, what would you what do you want them to take away from
either this conversation or just in general about the work that you do with families?
44:45 Norman, I haven’t thought of anything. You go first. And I sprung this on you. I am so sorry. It’s okay. I I’ll try to be quick on my feet. You know, the I I’ll start with a a statement from a wise guy. I’ve never met an executive or a trustee that had too much cash. Now, why do I say that? Because there are plenty of families with significant assets have done good planning, but generally they minimize how much cash they have on hand relative to what they might need when an estate needs to be settled. Yeah. And it’s for that reason I’ve said to a number of families, you know, we should create a letter of instructions for the executives and trustees as to which assets you want them to liquidate to settle your estate. And usually there’s a stare and why would I be creating this letter of instruction? I said, well, because they’re if you don’t want to guide them as to what to do, they’re just going to use their best judgment. if you don’t have a meaningful amount of cash at the ready. And it’s tickled me over the years how many times I’ve gotten the call from the family office saying the patriarch passed away. Notify the insurance company. And I was getting the call before the lawyers and the accountants. So, you know, these are people, you know, well-known Forbes 400 families that still looked at the insurance as a valuable asset in managing family stability. So it’s not to say everybody needs it, but it sure certainly should be considered. I don’t think it should be eliminated out of hand without evaluation. It’s not an investment asset. It’s a liquidity tool. I like that. It’s not an investment asset. It’s a liquidity tool. Okay. Okay. Harold, I belong So I belong to a group that meets on Thursday think tank mostly trust and estates attorneys. In fact, oh all of them about a hundred from all over the country and Norman the last discussion was an L letter of wishes which is what you were talking about but the 30,000 foot level from my point of view is and what and I believe it’s what prevents people from working with planning their estate or planning transfer of money. It is not a depressing topic. It is not whatsoever about debt. It’s about giving your kids more money and disinheriting as we spoke about earlier, Uncle Sam. It’s an up get a lot of thank yous when we do this and no tears. Oh, what’s going to happen when so and so dies? Who’s talking about that? We’re talking about money. We’re talking about retaining the money. And we’re also talking about maybe a family constitution retaining the wishes and the ideals that these kids should follow. Yeah. That help the parents create all this wealth.
47:44 Bonito. Love it. Well played to both of you for coming up with final thoughts uh without without getting any prep time. I I appreciate that and I couldn’t agree couldn’t agree more. So, Norman Herald, thank you very much for this conversation, for sharing some stories so perhaps the the families that are listening can hear, oh, that maybe that happened. Maybe it flips a switch. And Harold, I hope that from what you said that if someone is listening, they heard. This is not about you passing on. This is not about you not being here. This is about not inheriting multiple children that you didn’t actually want to inherit and doing more for the future for the ones that you want to. So if if you’re going into it, I don’t want to talk about it because it means I have to think about things I don’t want to think about. Change your perspective because that is not what this is about. This is a planning tool that should be part of your overall flanning tools and using fire drills and and keeping up with what you have because that’s how you protect your family moving forward. That’s how you protect the work that you have done and the the growth that you have made, the estate that you’ve created and the good work that you’ve done while you’ve while you have been walking this big green ball. Um, that’s how you do it. So amazing gentlemen. Thank you. Thank you. Thank you very much today.
49:25 Happy happy we got to do it.
49: 28 For any of those of you who are listening, you want to get in touch with Norman and Harold, a link to them and their email is going to be in the description below. If you have other questions, other topics that you think would be interesting to hear from these gentlemen. We didn’t quite get all of the funny out of y’all today, and I know it is there. So, I am hoping that we get some requests for some other topics because uh at this point, I think between the two of you, there’s not much that you haven’t seen over the years and and throughout the families that you worked with. So, I would love to do this again and continue telling stories so you as the family can put yourself in it and can make sure that you’re on the the uh the right side, not the I didn’t make a decision side. So with that again, thank you gentlemen very much. It was a pleasure being with you today and folks we look forward to seeing you next time. Have a great day. Thank you for joining me on the family office success podcast. I hope you found this conversation insightful and valuable as you navigate the complexities of family office services. If you’re looking for more ideas or resources or want to explore how we can support your family office or your family through services and training and strategy, connect with me on LinkedIn or visit our website at whiter riverconultants.com. And be sure to subscribe to our newsletter for updates and expert insights. And if you’re ready to take your family office to the next level, consider joining our mastermind where we can help you manage that chaos and create better outcomes for the families you serve. Until next time, I’m Christy Van Wright and this has been the Family Office Success Podcast. Take care and keep building for the future. Thank you for joining me today on the Family Office Success Podcast. I hope you found this conversation insightful and valuable as you navigate the complexities of family office services. If you’re looking for more ideas or resources or want to explore how we can support your family office or your family through services and training and strategy, connect with me on LinkedIn or visit our website at whiter riverconultants.com. And be sure to subscribe to our newsletter for updates and expert insights. And if you’re ready to take your family office to the next level, consider joining our mastermind where we can help you manage that chaos and create better outcomes for the families you serve. Until next time, I’m Christy Van Wright and this has been the Family Office Success Podcast. Take care and keep building for the future.
The Unger Company, Ltd. does not seek to practice law for clients and these published items are intended only to be informational in nature.