Client Snapshot

A partner in a large law firm was looking to retire early and give back to the community through pro bono work and teaching, while also ensuring he had saved enough to retire and maintain his family’s lifestyle.

Situation and Outcome

After a successful career in law, the attorney—in his 50s—had decided he wanted a change. Though looking to retire from his current firm, he hoped to stay immersed in the field through pro bono work and teaching.

Through a pre-existing relationship, he brought in Wescott to perform a cash-flow analysis and prepare a net-worth statement to determine if he had saved enough to maintain his lifestyle.  In addition, other issues were addressed, including gifting to the children, real estate investments and insurance planning.

Like many high-net-worth professionals, he and his wife had created UGMA accounts for their two children when they were young.  Wescott encouraged the couple to gift the maximum amount each year in an effort to save for college or to be used later for a down payment on a house.  When the parents gifted substantial amounts to the children upon getting married, Wescott advised them how to do so without incurring tax implications.

While the children were in college, they decided to move off-campus.  The father asked Wescott to perform a cost-benefit analysis on buying a residence for each versus paying rent for apartments.  The parents ultimately decided to purchase residences in two different cities.  After both children graduated, the family sold one unit at a profit.  Facing a substantial loss on the other unit, Wescott advised the client to turn the property into a rental unit.  As a converted rental property, the family will be able to maximize their investment by being able to deduct any loss upon a sale of the property.

Wescott also performed an analysis of making an investment in whole life insurance versus investing in term insurance.  Believing insurance should mitigate a risk, and not be used as an investment vehicle, the family purchased a term life insurance policy for each child and invested the anticipated whole life premium for their children’s’ benefit.   This provided the family greater flexibility regarding different investment vehicles,  asset protection through trusts, greater access to liquidity and flexibility without being locked into paying a significant annual premium.

Lessons Learned

Careful analysis and planning play an important role in retirement, but especially in early retirement.  A plus is when a financial advisor is also able to provide guidance on additional issues, and continue to guide the retiree through the next phase of his or her life, incorporating planning for the next generation.