Wealth often goes to waste when clients forget to create a will, one advisor said in the wake of a recent article by the New York Times about a Holocaust survivor who left an estate worth almost $40 million -- to no one.
"When Roman Blum died last year at age 97, his body lingered in the Staten Island University Hospital morgue for four days, until a rabbi at the hospital was able to track down his lawyer," the article by Julie Satow begins. Blum, a hugely successful real estate developer, left behind no heirs and no surviving family members. His former wife died in 1992 and the couple was childless. His estate is now the largest unclaimed estate in New York State history, according to the state comptrollers office. Great news for New York State.
A quote from the story from Paul Skurka, a fellow Holocaust survivor who befriended Blum after doing carpentry work for him in the 1970s: He was a very smart man but he died like an idiot."
Hugh Anderson, a HighTower financial advisor, is not so harsh as to label Blum an idiot, but he does call the situation "very sad and depressing." Blum's story showcases, on a very large scale, the dangers of forgetting, or perhaps avoiding, a will.
The New York Times piece explains how Mason Corn, Blums accountant and friend for 30 years, encouraged him to create a will. I spoke to Roman many times before he passed away, and he knew what to do, how to name beneficiaries," Corn is cited as saying. Two weeks before he died, I had finally gotten him to sit down. He saw the end was coming. He was becoming mentally feeble. We agreed. I had to go away, and so he told me, OK, when you come back I will do it. But by then it was too late. We came this close, but we missed the boat.
To that end, Anderson says bluntly: "That is not the time to create a will. So when is the best time? "Immediately," he says. Anderson and his team at HighTower have roughly $500 million under management and around 300 clients. He has discussed a will with every single one of them from day one a standard practice among financial advisors. Those conversations surrounding a will are even discussed with the youngest of clients to make them aware. When clients are in the later stages of their lives, they might not be mentally aware to make those long-term decisions, says Anderson.
"Usually people of significant wealth have spent time trying to minimize the tax bite of their personal income. As advisors, we emphasize to clients why they should make sure there isn't a huge tax bite to their wealth after they pass away," he tells me.
When Anderson encounters clients who are resistant to creating a will, he asks them to find out where they have emotional connections to decide on a philanthropy that would be fitting. "It's so much better to donate to a philanthropy than to make sure money doesn't go to abandoned property...I imagine Blum, a Holocaust survivor, might have had an emotional connection to a philanthropy for Holocaust victims and their families, or more generally for people displaced during war time."
But what if you don't have a philanthropy you feel that emotional connection with? Why not leave it to the state -- in this case, New York -- which suffers from underfunding in its infrastructure, hospitals, and education system, you might ask? That sounds charitable
Government isn't the most efficient dispenser of finance, Anderson says. "The best investor in finance are the donors, who can tell exactly where they want money to go. With the most efficient charities, about 80-85% of money donated goes to the mission at hand, with the rest being overhead costs. John Restrepo, principal of RCG Economics, estimates that most government spending rates are 60-75% efficiency. In other words, of every $10 million that Blum left to the state, around $6 million to $7.5 million would go to the actual mission at hand, as prevailing wages of many government jobs tend to increase the costs of service.
The bottom line: If clients have a will and have done their homework, they will make sure their money is spent wisely and purposefully.
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