In 2008, Congress recognized the need for the public to understand the importance and benefits of estate planning by passing House Resolution 1499, which designated the third week of October as National Estate Planning Awareness Week. Nevertheless, according to a 2019 survey carried out by Caring.com, 57% of adults in the United States have not prepared any estate planning documents such as a will or trust despite the fact that 76% viewed them as important. Many of the respondents said this was due to procrastination, but many others mistakenly believed that it was not necessary because they did not have many assets.

Estate Planning Awareness Week is a great reminder of the need to explain what estate planning is to your clients and why it is crucial for them not to delay putting an estate plan in place, regardless of the size of their estate.

What Is Estate Planning?

Estate planning is an important part of your clients’ financial planning, as the creation of an estate plan enables the growth, protection, and transfer of their wealth in accordance with their identified goals. It involves much more than simply designating who they would like to receive their property when they die. An estate plan will help provide financial stability for your clients’ surviving spouse, preserve and protect their assets, minimize tax liability and other costs, support their designated charities, and name trusted individuals to make decisions on their behalf in the event they become incapacitated.

As your clients’ trusted financial advisor, you can help them become aware of their need to create or update their estate plan to achieve their goals. A good estate plan typically consists of multiple components that are tailored to meet your clients’ individual goals and needs. Ask your clients if they have in place some of the most commonly used estate planning tools, which include:

Last Will and Testament. It is essential for your clients to have a will: If they do not, their property will be distributed according to state law rather than in a way they have chosen. Although the results are occasionally the same as they would have wanted, they more often are not. Most people would rather not have this decision made for them, as it can sometimes lead to very undesirable and unintended  results. In a will, your clients can name an executor–also called a personal representative–who will help carry out their wishes as specified in their will and designate a guardian for minor children or other dependents.

Trust. A trust may also be appropriate for clients who seek privacy and wish to avoid probate. Many people find a revocable living trust to be beneficial, as they can retain control of their assets prior to their death, but those assets can pass immediately to their named beneficiaries without probate after their death. Trusts are often superior tools for incapacity planning. Some types of trusts also provide tax advantages or asset protection.

Powers of attorney. A financial power of attorney will allow your client to designate an individual to make financial and property decisions on their behalf. Financial powers attorney enable a trusted individual to file taxes, pay bills, apply for government benefits, and much more. Financial powers of attorney can be customized to meet your clients unique situation and goals.  Similarly, a medical power of attorney enables your client to designate a person they trust to make medical decisions for them when they are incapacitated or otherwise unable to communicate.

Advance directives. Also known as a living will, an advanced directive is a legal document used to provide instructions for your clients’ family, doctor, or other healthcare provider if they unable to communicate the information themselves, including, for example, whether or not they wish to remain on life support if they are in a persistent vegetative state or terminal condition.

Beneficiary designations. Some property, including trust assets, can pass to your client’s beneficiaries without having to be mentioned in their will or go through the probate process. This includes funds held in IRAs and 401(k)s, and life insurance. For some types of accounts, such as 401(k)s, a spouse is the primary beneficiary by law unless the spouse signs a waiver. Nevertheless, it is essential for your clients to name a primary beneficiary, as well as a contingent beneficiary, to receive the funds upon their death for these accounts or policies. Otherwise, the funds held in these accounts, or the death benefit in the case of a life insurance policy, may be distributed according to state law or pursuant to the terms of the retirement plan rather than according to your clients’ wishes.

How to Broach the Subject

Estate planning is often a difficult topic to bring up with clients, as it brings the unpleasant topics of aging and death to the forefront of their minds. However, creating or updating an estate plan can also provide significant peace of mind for your clients by ensuring their life savings are protected, plans are in place in the event they become ill, and their property is passed down according to their wishes.

One way to begin the conversation is to talk first about whether their beneficiary designations accurately reflect their wishes, and whether the primary beneficiaries of their accounts or policies could actually handle a lump sum payment or windfall upon their death. You might discover that their goals and wishes are not as straight forward and that they need estate planning to ensure their assets are transferred to whom they want and in the way they wish.  They might have specific ideas on how to provide for the care of any children, grandchildren, or pets.  Your clients may also have concerns about how their finances, property, or business interests would be managed in the event they become incapacitated.

Let’s Work Together

Educating your clients about the need for a comprehensive estate plan will demonstrate that you care not only about their present financial planning, but also the protection of their legacy, their personal wellbeing, and the welfare of their children or grandchildren. As your clients’ financial advisor, you are closely attuned to their financial needs and goals, both for themselves and for their families, and you keep abreast of changes in their life circumstances, i.e. divorces, marriages, children reaching adulthood. As a team, we can work together to make sure that your clients have an up-to-date estate plan that provides financial security for themselves and their families and makes arrangements for their care should they become incapacitated.

Contact us today to discuss how we can collaborate for the benefit of your clients.