Most people believe that having a proper estate plan in place is important to ensure that they and their families are taken care of. According to Caring.com’s 2019 survey, 76 percent of respondents believe that having a will is important, but only 40 percent of the respondents actually have one. Therefore, it is likely that many of your clients believe that proper planning is important but they may not have the right legal documents—or any at all—in place. Working together, we can increase these numbers.

Estate planning basics

Estate planning is not a one-size-fits-all endeavor. It is a customized plan designed to best protect each client and their loved ones. Most estate plans should include some or all of the following components:

Will: A will (sometimes referred to as a last will and testament) is a written document used to appoint a personal representative (or executor) to handle the person’s affairs upon his or her death, explain how his or her property and money are to be distributed, and appoint a guardian to care for minor or dependent children.

Pour-Over Will: A special type of will in which the person’s trust is named as his or her beneficiary. This document is used in case the client has created a trust but did not fully fund (i.e. transfer or retitle assets) prior to death. The pour-over will is admitted to the probate court, and everything is transferred to the trust through the probate proceedings.

Revocable Living Trust: While there are many different types of trusts, a revocable living trust is often the foundation of an estate plan. A revocable living trust is a written agreement in which a trustee is appointed to hold title to and manage property for the benefit of one or more beneficiaries. In many instances, the client will serve as the initial trustee and primary beneficiary. Upon the client’s incapacity, the trust property will be managed by a nominated successor trustee for the benefit of such client with little interruption and no court involvement. Upon death, the successor trustee manages and distributes the assets according to the trust’s terms.

Financial Power of Attorney: A written instrument in which the client has named an individual to act on his or her behalf in financial affairs (e.g., signing a deed, opening a bank account, signing checks, filing taxes, etc.). There are several different types of financial powers of attorney depending upon the client’s needs and the types of transactions that might be required.

Medical Power of Attorney: This document allows the client to nominate an individual to make medical decisions on his or her behalf in the event he or she becomes incapacitated or otherwise unable to communicate. This power only goes into effect upon the inability of the client to communicate.

What If No Planning Has Been Done or Was Done Incorrectly?

If no estate planning has been done, the court will have to be involved. In the event the client becomes incapacitated, the family will have to petition the court to appoint a person to make financial decisions on the client’s behalf. The court will also have to appoint an individual to make medical decisions for the client. Because the client is incapacitated, he or she will have no way of communicating who he or she would like in those roles. The judge will have to decide based on investigations and the testimony of the interested parties in a very public proceeding–which may or may not reflect your client’s actual wishes.

If the client dies without an estate plan, the client’s property and financial assets will be distributed through the probate process to his or her family based upon the state’s intestacy statute. In many cases, this distribution scheme is contrary to what the client would have wanted. Also, the probate process can be time-consuming, expensive, and public.

Probate may also be required if your client has a will or if they have a trust that was not completely “funded” (assets were not properly transferred to the trust or retitled in the name of the trust). The only difference is that the will determines who receives the assets rather than state law.

The Advisor’s Role in Estate Planning

In light of a new decade, now is a great time to discuss estate planning with your clients. Your knowledge of the client, their family, and their financial background is crucial to ensuring that a proper estate plan is implemented. Working together, we can provide the client with a comprehensive plan.

When meeting with your clients, you can casually bring up the topic of estate planning. If you know that estate planning documents have been prepared, you can inquire about the last time they were reviewed. This is incredibly important if clients mention they or their family have recently gone through a major life change that could impact their planning (e.g., marriage, divorce, births, deaths, etc.).

There are multiple benefits to having this estate planning discussion:

  • Showcasing your role as a connector to different professionals to meet the client’s needs
  • Deepening your relationship with the client by demonstrating your care and attention to detail for the client and the client’s family
  • Allowing you to encourage proper planning so you will be familiar with the individuals you might work with in the event the client becomes incapacitated
  • Giving you the chance to cultivate a relationship with the extended family and become their trusted advisor, bringing in new clients and increasing the likelihood of continued assets under management
  • Identifying opportunities for additional products, such as life insurance or retirement accounts

Estate planning is important at anytime. We are here to help guide you through the conversation and offer any additional support you need in servings your client’s best interests. Contact us today so we can discuss ways to collaborate.