17 December 2020

A-Hole-in-One: Holistic Approach to Estate Planning

Guy Sagiv co-heads the Family Wealth Management Group at the Yigal Arnon & Co. law firm and has been advising high net families and individuals on their estate planning for more than a decade. Guy believes that the coronavirus is a wake-up call for every person who has been procrastinating with dealing with their estate planning.

Don’t you find it awkward to conduct meetings over Zoom or Skype on such sensitive and complex matters?

“Admittedly, I did think this will be an issue, but then I realized that the lack of boundaries actually creates a more friendly and informal environment for clients, making such meetings much more effective by creating intimacy which is very hard to achieve at our offices the 47th floor in Azrieli Towers in Tel Aviv.”

I understand that you have recently adopted a new holistic approach. Why?

“I believe that our decision to adopt the holistic and cumulative approach used in England and the US in the area of family wealth management and private clients has proven itself during the years and more so during the recent pandemic."

So what is exactly a “holistic and cumulative approach” to wealth management?

In Israel a client seeking legal advice associated with wealth management is often required to deal with lawyers from different specialty groups and, at times, different firms, and integrate the advice independently. The lawyer who made a will for a client, for instance, is often not aware that there is a foreign trust of which the client is a beneficiary, and the client’s tax advisor may not know what is written in the will, because in Israel there is no inheritance tax. This may create legal oversights and potential point of exposure such as tax liabilities in Israel or abroad, which lead to increased struggles in what is already a sensitive and stressful situation. Matters become even more complex when clients have property abroad, multi-national citizenship, foreign clients who own property in Israel, family members and descendants living abroad, new immigrants or returning residents etc. This is the reason why our Family Wealth Management group is regarded as a “specialty task force” comprised of our top legal experts from the firm’s various departments– Family, estate and trusts, tax, real estate, corporate, High-Tech, IP etc. In addition, we have created a network of top experts from main jurisdictions in the world in order to provide our clients a “one-stop-shop” for all their legal needs with regards to their estate planning, whereby all the information is integrated into a holistic unified planning.

And how does it work?

“Together with the client, we plan how the Estate will be managed and divided starting as of the present and in anticipation for three additional life stages:

(1) Present: When the client is active and competent and can make decisions regarding his property on an ongoing basis

(2) Retirement: When the client wants to step back from active management of his business and property and enjoy the fruits of his labor

(3) Incompetence: If the client becomes incompetent, mechanisms must be established regarding the manner of managing the property

(4) After death: After the death of the client and the division of property.

“We build a business/family plan for the client taking into account the above step, based on the concept that clients must know the plan for the next step and what they have done in the previous step, so they will know how to act in that specific point in time," explains Sagiv.

Why is it not sufficient to draft a will?

“Drafting a will without a complete planning envelope is no longer an effective instrument for intergenerational transfer for several reasons,” says Sagiv. “Due to the steady increase in life expectancy, offspring may receive their inheritance at an older age and they may not have the qualifications to do anything significant with their inheritance. Complex wills are characterized by complicated and often vague wording.

As a result, such wills invite objections and disputes among the heirs and often the validity of the will itself. “Moreover, inheritance disputes are characterized by inherent difficulty, such as the testator dies and cannot be asked what his/her wishes are. In such situations, the court is forced to learn about the intent of the testator from external evidence, especially testimonies of the testator’s family members. In fact, the court “rewrites” the will based on the version of an interested party who did a better job in court, which does not necessarily reflect the intentions of the testator.”

“We encounter more and more cases where people die at an advanced age, after a relatively long time of being medically un-fit to make decisions. Therefore, the decision to divide the property may ignore the possibility that the property will be held by a proxy for many years, often yielding inaction.

Fortunately, three years ago there was a massive reform of the legal qualification laws. Today, the continuous power of attorney allows clients to plan this stage of their lives. They may determine the identity of their proxy, the areas and limits of the proxy’s authority, and the date or circumstances under which the continuous power of attorney will take effect. And most importantly, drafting a continuous power of attorney reduces the involvement of the state (through the Custodian General) and the courts.

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