Help child-free clients plan for their later years

The number of child-free couples in the U.S. is increasing rapidly, creating a niche market for financial planners interested in helping them set and achieve their financial-planning goals.  Here is how two financial professionals are meeting the unique financial-planning needs of this growing market.

Defining child-free financial planning

Child-free financial planning is about building a financial plan around the life that a client actually wants to live rather than assuming that children will be part of the equation, said Brandon Wellman, financial planner at Navigator Wealth Strategies and an 8-year Million Dollar Round Table member

“The fundamentals of financial planning are still the same, but the goals can look very different,” he added. “Without children, clients may have more flexibility around how they spend, save, retire, give or ultimately distribute their wealth. The advisor’s job is to understand what matters most to that client and build the plan around those priorities.”

Wellman does not necessarily think of child-free financial planning as different from “regular” financial planning, as it requires financial professionals to question some of the assumptions that can become automatic in the profession.

“For clients with children,” he said, “we often talk about education funding, providing for children, leaving an inheritance or eventually relying on family members as part of their support system.”

But those conversations may not apply to a child-free client, Wellman said. Instead, he said, “we may spend more time discussing lifestyle goals, travel, charitable giving, early or flexible retirement, and what they ultimately want to happen with their wealth. Long-term care and aging can also take on added importance. If adult children aren’t going to be part of the support system later in life, we need to be especially intentional about who will help make financial or health care decisions and what resources will be available to provide care. Estate planning is still incredibly important, but the conversation may be less about ‘what do you want to leave to your kids?’ and more about ‘what do you want your money to accomplish during your life and after you’re gone?’”

Terri Krueger, owner of Orla Wealth Management and a 12-year MDRT member, said that she often deals with childless clients.  In these situations, she added, clients either do not have their own children to leave their hard-earned to or they may have children, but for various reasons, have decided that they would like their money to go elsewhere.

Either way, Krueger said, she and her firm typically focus on a few things:

• Helping clients make their dreams a reality during life
• Helping clients plan well and identifying what causes they want to honor when they die
• Helping them plan for long-term care

Making dreams a reality

Krueger added that to make these dreams a reality, financial professionals must understand all of their clients’ expenses and then start testing spending trends.

• Can you spend $20,000 a year?
• Can you spend $50,000 a year?
• Where does it start to become a problem?
• What happens when one spouse dies?

A significant tax change occurs when a spouse dies, she said. When a spouse dies, the tax implications get extreme, requiring thousands of dollars to be allocated to taxes per year.

“To prepare for this,” Krueger said, “we look at transferring individual retirement account funds into Roth funds, which helps protect funds for the surviving spouse. We also do tax planning so the couple can see how they may be impacted by half of the couple passing away so they can plan accordingly. This is where a qualified longevity annuity contract comes into play. If you’re not familiar with it, it’s where you want to defer your required minimum distributions until age 85. That may not be something they want to do because at age 85, what are we going to do with this $120,000 or so that has grown? Either way, it’s an option with many clients.”

Krueger and her firm then walk their clients through the benefits of a trust and establish clear communications about whom they would like to assign as an executor and if there are any causes or funds they would like to contribute to after death. “Who do you want to manage selling your possessions and your house and where will those funds go?” she asks. These are all things that must be thought through ahead of time with care.

Finally, they then need to solve a long-term care problem. In many cases, Krueger said, children will step in to help parents in times of need as they age. But in the case of child-free clients, situations usually leave one spouse carrying the full burden of their partner’s care or their own. To prepare for these situations, she said that there is a need to come up with a comprehensive long-term care plan to make sure that each person is taken care of, even if their spouse is no longer with them.

If the client can stay in their home, are they interested in hiring a 24-hour nurse? Krueger asked. Are they open to the thought of a nursing home somewhere down the line?  If so, they must make sure that there are at least six months of cash to pay for a nursing home that fits their desired lifestyle and medical needs. These medical allocations must be incorporated into the overall plan, she said.

Advice for those interested in pursuing this market

Wellman and Krueger shared some words of wisdom for financial advisors and planners interested in entering the child-free couples’ financial-planning market.

“Start by listening and don’t make assumptions,” Wellman said. “Something as simple as automatically asking about ‘leaving money to the kids’ can unintentionally tell a client that you already have a picture in your head of what their life and financial plan should look like.”

Instead, Wellman said, advisors should ask broader questions such as: What does a great life look like to you? Who and what are the most important to you? What would you like your money to allow you to experience? What people, organizations or causes would you like to support? Who do you trust to help you if you can’t make decisions for yourself someday?

Most importantly, Wellman added, advisors should not treat being child-free as something that must be explained or compensated for. “It’s simply one part of understanding the client sitting across from you,” he said. “The opportunity for advisors is to remove the assumptions, ask better questions and help clients build a financial plan that reflects their version of a meaningful life.”

Krueger expressed similar sentiments in her words of wisdom. As she said, be objective.

“It’s common for advisors to unknowingly push our ideas or morals onto those in front of us,” she said. “When you have children, it’s difficult to understand what it feels like to not have any heirs. Be mindful when you’re working with a client who has different experiences than your own. If you don’t know what they’re going through because you’ve not experienced it, then, like we often hear in sales, listen. Ask questions and listen; the clients will tell you what they’re up against. If you start making assumptions, you may end up leading your client down the wrong path.”

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