Protecting assets from estate taxes and avoiding the probate process are two of the most crucial aspects for estate planning. Through the use of instruments designed to reduce or even eliminate the burden of wealth-transfer taxes, financial planners can ensure their clients are able to bequeath the greatest amount of their assets to the people or groups of their choosing.
Having a robust estate plan in place that includes trusts, life insurance and more, not only alleviates the worry and concern a client might be carrying around about what will happen to these assets, it also eliminates the cost and confusion that arises whenever a person passes away. Ultimately, having the appropriate papers in place when they pass away helps clients’ families and loved ones focus on the emotional parts of the mourning process, not the financial aspects.
Financial planners operate in an ideal place to educate and guide their clients through creating a robust estate plan. With knowledge about their clients’ personal and financial histories, planning professionals can make insightful suggestions and informed decisions about what products and legal documents would work best.
Educate clients on estate planning
Although they might be extremely financially savvy, there’s still a chance a client might not be familiar with the probate process and the full range of wealth transfer taxes that arise at a person’s death. Probate is an often poorly understood area of the law and any amount of insider information or useful knowledge that financial planners can impart on their clients will ultimately make the estate planning process much more comprehensible and successful.
“Forty percent of Americans do not have a life insurance plan.”
It’s important to keep in mind that the main purpose for initiating a discussion about estate planning is to educate your clients on why having these documents in place is so crucial. Some individuals may think the estate plan covers a will, powers of attorney and maybe a trust. Indeed, 40 percent of Americans do not own any life insurance, according to the LIMRA 2016 Insurance Barometer Study. While this number jumps to 76 percent for households with income of $100,000 or more, there’s still a considerable amount of people without any life insurance policies in place.
By educating them on the full range of life insurance products, fixed annuities and other wealth planning options, financial advisors can ensure their clients are knowledgeable about which route best suits their particular situation, and they can guarantee their clients’ assets are protected during the asset-transfer process.
Recommend a trusted lawyer
As a financial planner, you might already have the names of a few estate planning attorneys ready to go in your network of centers of influence that you can recommend to your clients. If not, you should consider forging a partnership with some trusted elder law or estate planning attorneys. When discussing end-of-life planning with your clients, it helps to be able to have a go-to name at hand that you can provide as that streamlines the process.
In addition, by sending clients to a trusted associate, it makes the planning out the estate – including recommending life insurance products – much easier and more organized. Plus, as noted in the Journal of Financial Planning, creating a solid working relationship with the professionals who draft end-of-life documents can open opportunities down the road for acquiring new clients and growing your business.
Monitor and follow-up with clients
Due to the changes that occur in every person’s life, estate plans can be fluid and dynamic documents that may require revisions. Financial planners should set up reminders or alerts to follow up with clients at least once a year to remind them to review their estate plans. A new addition to the family such as after a marriage or the birth of a grandchild, or the loss of a family member calls for a revamp of the estate plan. Similarly, shifts in the stock market, a new business deal or any number of external factors can also contribute to the estate plan needing an amendment or rider.
Not only does keeping tabs on changes in a client’s life that may necessitate changes to their estate plan keep clients satisfied, but it also demonstrates your commitment to looking out for their best interest – which could potentially translate into more business in the future.
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- Robert W. Finnegan, J.D., CLU®, Published in Trusts & Estates Magazine - June 6, 2018