As a financial advisor, what could be more important than the financial health of your clients?As you know, a comprehensive trust-centered estate plan allows your clients to provide for loved ones, affording them immense peace of mind. But, estate planning is not a one-time event since trust-centered estate plans require careful supervision and regular reviews to function properly. Accordingly, it’s crucial that you participate in the maintenance of your clients’ trusts by monitoring important financial changes and helping clients to update their plans to reflect these changes.
Maintaining your estate plan can feel overwhelming when faced with all the changes life can bring. Calling your attorney may not be your first instinct when you’re faced with a significant shift in income, investments, or employment, but consulting with us is a wise way to ensure your legal health is always maintained. Read on for five events that should capture your attention and prompt you to reach out to us for some personalized advice.
How to Tailor the Conversation to Their Goals
Financial advisors often have a clear path to starting the estate planning discussion when their clients have children, as many estate planning discussions center around clients’ objectives for passing their wealth, properties, and legacy to the next generation.
Because of this traditional emphasis on the next generation, individuals and couples without children can easily arrive at the conclusion that they don’t need the same level of detail in their own plans or, worse yet, that they don’t need a plan at all. Nevertheless, there are several ways to help estate planning resonate with individuals and couples who aren’t parents.
Reframe the planning conversation
You can keep these clients engaged and help them find fulfillment by shifting your message away from discussions about bettering future generations and focusing instead on ways to plan for life, the future, and a legacy. Remind them that estate planning deals with a wide range of important issues like ensuring trusted people can make decisions if the client is unable to do so because of illness, incapacity, or death, and supporting meaningful causes they care about.
Planning for flexibility and the future “what-ifs” of life is important for young, child-free clients. Working successfully with these clients involves helping them pinpoint their core motivations and goals regarding their wealth and legacy. Ask them to reflect on the following questions:
- Why are you saving and investing?
- What do you want to accomplish during your life?
- What legacy do you want to leave?
- What impact do you want to leave?
Exploring these topics helps clients without children become engaged in estate and financial planning.
Think upstream for younger clients
Rather than directing their assets toward their descendants, some clients, especially young, single, and child-free clients, may be inclined toward transferring their wealth “upstream” to their parents or grandparents.
Issues arise, however, when these plans are not optimized for the issues faced by older beneficiaries. Certain estate planning solutions can help them make a positive impact on their older loved ones’ lives in regards to Medicaid, asset protection concerns, and blended families. Clients who want to leave their wealth “upstream” must discuss their goals with an estate planner to ensure the plan will work as intended.
An emphasis on philanthropy
Charitable planning may be more prevalent for clients without children. This is especially true for older individuals who have built lifelong connections to a particular passion that they’d like to support. Talking to these clients in terms of their potential for creating a positive impact is a helpful strategy for all parties involved.
In many cases, a comprehensive plan may be a better strategy than simply naming a favorite charity as a beneficiary on an investment account. One of the biggest risks these clients face is that they often assume that a simple plan is the best, but that assumption may, sadly, limit the opportunity they have to leave an impact.
Clients rarely want their assets ending up with a distant relative or being claimed by the state, and will appreciate developing a plan that’s meaningful to them. When an individual dies without leaving a will, this is referred to as “dying intestate.” This scenario brings with it a number of complications, as the state legislature has essentially written the client’s estate plan for them. For clients without children, this is often not the estate plan they would have selected.
Different generations take different approaches to life, and your likelihood of working with more childless clients is increasing. The birthrate in the U.S. has been low for decades, but there were record low fertility rates in 2017 and 2018, as many millennial women and couples are choosing to delay or avoid parenthood.
Helping these clients define clear, personal goals for financial and estate planning is an excellent way to add value to your financial planning services and engage with this growing demographic. Let’s schedule a quick discussion to cover other ways you can build trust and increase engagement with your clients. Give us a call today.
Strategies to Enhance Your Success
Estate planning is complex and continually evolving. Often, affluent families are “early adopters” of the newest and best estate planning strategies. Luckily, by working with us, you can benefit from the same estate planning strategies that affluent families do. Here are a few techniques we should discuss soon.
1. Maintain an up-to-date, trust-centered plan
The foundation of your estate plan must achieve your goals and needs. Wealthy people tend to utilize estate plans with all assets funded into or aligned with trusts. Not only should your estate plan be trust-centered, but it should also be continually updated as your life, family circumstances, and the law grow and change. Make sure your current estate plan always reflects your goals—a tried-and-true secret of the affluent.
2. Create special trusts for special assets
Wealthy people take advantage of the legal and tax opportunities presented by unique assets or investments. Many types of assets, such as IRAs, life insurance, business ownership, and more, require specialized planning to work properly in your estate plan.
If you’ve saved for retirement, you know the value of an IRA, a 401(k) or another retirement plan. You are probably also familiar with the beneficiary designations for these plans. But, you may not be familiar with a specialized trust, called a standalone retirement trust or IRA trust. This trust lays out exact instructions about where the money in your IRA will go after you’re gone. If you’ve seen substantial accumulation in your IRA, you may not want its entirety to be disbursed to a beneficiary all at once. You’ve worked a lifetime to save, and the IRA trust empowers you to protect what you’re leaving behind.
In a similar fashion, life insurance trusts give you more control over your life insurance benefits, allowing you to direct what occurs to your life insurance policy in more detail than is possible with a plain beneficiary form. It can be risky to name your minor children as the beneficiaries of your policy. If your children are not yet adults, the insurance company often requires a court-appointed guardian to receive the funds, a potentially costly and lengthy process. Many people may decide to leave the policy benefits directly to the children’s caretaker to avoid this guardianship issue. But, leaving the policy benefits to your children’s caretaker outright doesn’t ensure that the money is used for the benefit of your children. A life insurance trust can protect what you’re leaving behind and ensure it is used for the benefit of your beneficiaries.
Unlike a plain beneficiary designation, a trust also lets you designate specific uses for your money by your beneficiaries, such as educational funding. The wealthy don’t leave these things to chance and instead use proactive trust-centered planning to achieve their goals and protect their families.
3. Build a collaborative professional team
Wealthy people rarely plan and work with professionals in isolation. They know they can get better outcomes by meshing their legal, tax, and financial plans together. Rather than silo their strategies with various advisors, they ensure their team is optimizing their results through a collaborative approach.
As you build out your team, seek out professionals who are enthusiastic about working with one another across disciplines. The more visibility they have into one another’s strategies, the better they’ll be able to provide you with the best possible benefits. Call us today. We can discuss the best ways to put these and other estate planning approaches of the wealthy into action for you.
How to Steer Your Clients in the Right Direction
Estate planning provides your clients with a wealth of opportunities to strategically grow their net worth while also planning for their families’ future comfort and security. Opportunity brings risk, but also the potential reward of deeper, longer-lasting client relationships.
Educational Topics for Your Clients That Can Help Your Business
What you don’t know can end up hurting your clients, and in turn, limit your ability to secure future business opportunities and retain assets under management. That’s why it’s important to learn about and discuss the potential estate planning risks faced by your clients.
When you discuss the value of estate planning and these hidden risks with your clients, you strengthen your professional relationships, build long-lasting trust, and help clients maximize their financial well-being.
As the end of the year approaches and you begin to look back on 2018, what changes need to be reflected in your estate plan? Have you gotten married or divorced in the past year? Perhaps you’ve welcomed a new child or grandchild, or experienced a change in your health. So much can change in a year, and it’s important not to let too much time pass before those changes are reflected in your plan.
Just like you need to stay in regular contact with financial advisors, primary health care providers, and accountants, your estate plan will serve you best when it’s kept up to date with the changes that shape your life.
Confused about the differences between wills and trusts? If so, you’re not alone. While it’s always wise to contact experts like us, it’s also important to understand the basics. Here’s a quick and simple reference guide:
You May Not Think You Need a Will, But You Really Do.
Most Americans do not have a simple will as part of their estate plan. You might believe that a will is only for the rich and famous, and not the average person who has a far smaller net worth. On the other hand, you may think that a will is entirely unnecessary since you have a trust, jointly owned property, or have named beneficiaries on your insurance.
Although many people equate “estate planning” with having a will, there are many advantages to having a trust rather than a will as the centerpiece of your estate plan. While there are other estate planning tools (such as joint tenancy, transfer on death, beneficiary designations, to name a few), only a trust provides comprehensive management of your property in the event you can’t make financial decisions for yourself (commonly called legal incapacity) or after your death.
You have worked hard for years, have family members and friends you care about, and have approached a time in your life when “estate planning” sounds like something you should do, but you are not exactly sure why. You may feel that you are not wealthy enough or old enough to bother or care. Or you may already have a Will and feel that you are all set on that front. Whatever your current position, consider these common misconceptions about estate planning: