How Can A Financial Advisor Help With Estate Planning?
Times when a financial advisor can help with estate planning
Estate planning services are valuable for various reasons. For one, it’s a complicated process that includes multiple professionals and involves an air-tight plan.
It’s also one area where you can truly use your abilities to make sure that your clients have the peace of mind they’re looking for when they hire your services.
There are a lot of factors to consider during this process, from the client’s expectations, legal liabilities, and financial components, to tax considerations. It’s a complex process that may involve multiple professionals working together. You’ll often encounter estate planning attorneys who give legal advice and prepare all the legal documents needed during the process. You might even see fellow financial planning professionals that specialize in other areas.
With so many people involved, it's important that you know where your financial services can be most helpful.
This article will explore various situations where your expertise as an estate planner can help clients navigate their unique challenges.
Retirement planning
As a financial planner, you can start by helping clients set up retirement accounts and savings accounts, such as 401(k)s, IRAs, and other savings vehicles. Explain the tax benefits and beneficiary details for each account type and help clients decide which option best aligns with their specific situation, financial goals, and budget.
By assisting clients to navigate the complexities of retirement planning, you not only ensure that they make the most of their savings but also create a strong foundation for their financial future.
In doing so, you foster a trusting relationship with your clients and enhance your reputation as a knowledgeable and reliable financial advisor.
Ensuring beneficiaries are named/updated
One aspect of estate planning is keeping beneficiary designations in your client’s estate planning documents up to date – especially when major life events occur, such as divorce, remarriage, or the death of a previous beneficiary.
It’s your responsibility to help your clients identify the accounts affected by these changes and assist them in making the appropriate modifications to their estate plans. This may involve changing account titles or updating the tax identification in their estate planning documents to accurately reflect the new beneficiaries.
By keeping up with your clients' lives, you can ensure that their assets are distributed according to their wishes, minimizing potential disputes and confusion among loved ones.
Furthermore, by guiding your clients through these updates, you demonstrate your commitment to their well-being and instill confidence in your ability to manage their financial affairs effectively.
Considering significant life changes
Life's unpredictable nature means that significant changes are bound to occur, which can have far-reaching consequences on your client’s financial situation and estate plan.
It's crucial to ensure that your clients' estate plans match their circumstances. You need to be prepared to guide clients through these transitions and help them adapt their plans accordingly.
Diving into this aspect of estate planning, it is important to recognize that changes in a client's life can impact more than just their beneficiary designations. For example, they might experience fluctuations in income, changes in asset ownership, or adjustments to their financial goals.
As their financial advisor, your role is to identify the potential effects of these changes on their financial future and offer practical suggestions for modifying their accounts, income sources, and other financial elements of their estate plan.
Succession planning for your assets
Navigating the intricacies of transferring assets to beneficiaries can be a complex and stressful process for many. There are many paths your client can take when they want to pass on their assets to friends, charities, or family members – each with its own benefits and potential pitfalls that might not seem as apparent. Your guidance here will be invaluable, as you can help your clients make informed decisions that align with their goals and values.
Each method has its own set of advantages and drawbacks, and the right choice will largely depend on the specific needs and circumstances of your client. Some common options include creating a trust, establishing a donor-advised fund, or utilizing beneficiary designations for life insurance policies and retirement accounts.
As you discover your client’s preferences, you’ll start to form a plan. A few important questions during these sessions are:
Should your client establish a trust? A trust might help your clients avoid probate, but there are various types of trust, such as living trust, charitable trust, and irrevocable trust. Which one will benefit your client best?
Do they have a living will?
Do they have minor children? Who will take care of said children in the event of their passing?
What are the considerations on how and when their children should receive their inheritance?
How does their life insurance policy fit into their plans? Have they created a plan to distribute their assets?
What kind of property will they be passing on? Real estate? Retirement accounts? Mutual funds?
By providing clear explanations of each option and their associated benefits and risks, you can empower your clients to make the best decisions for their estate planning needs, ensuring their legacy is preserved and their wishes are honored.
Setting up legacies you love
The estate planning process is not just about the numbers and legalities; it's also about creating a lasting legacy that reflects your client's values, goals, and priorities.
To help your clients develop a clear vision of the legacy they wish to leave behind, encourage them to think beyond the financial and legal aspects of their estate.
Instead, consider how their wealth and assets can be used to create a meaningful impact on the lives of their loved ones, their community, or even the world at large. By discussing these broader goals and aspirations, you can assist your clients in crafting an estate plan that is a true extension of their values and priorities.
As your clients ponder the legacy they want to leave, ask them to reflect on the following questions:
How can their estate be an extension and reflection of their goals, values, and priorities?
How can their legacy live on for generations to come?
What does "legacy" mean to them?
By addressing these questions, you can help your clients develop a deeper understanding of their desired legacy. Create an estate plan that not only addresses the technical aspects but also ensures their wealth is utilized in a manner that aligns with their vision for the future.
Taking taxes into account
Your expertise as a financial advisor can play a vital role in helping your clients navigate the complex world of taxes. By doing this, you can help clients minimize their tax burden and maximize the assets they pass on to their loved ones.
One of the key considerations in tax-efficient estate planning is making the most of estate tax exemptions. It's also essential to explore options such as gifting assets during their lifetime, using trusts where appropriate, and strategically allocating specific assets to heirs while utilizing others for income in retirement.
When evaluating these options, it's vital to take a holistic approach and assess the total tax impact across your client's entire financial situation over multiple years. By doing so, you can help your clients make informed decisions that will minimize their tax liabilities and maximize the value of their estate in the long run.
Remember, the goal is not to focus solely on the immediate impact of isolated choices but to develop a comprehensive strategy that considers the broader financial picture. This approach will ensure your clients' estate plans are both tax-efficient and aligned with their overall financial goals and objectives.
Planning for long-term care
Without preparation, healthcare expenses can eat up a considerable sum of your client’s accounts.
Knowing what kind of expenses they might incur during this period can help you estimate a more realistic estate plan as well. Proactively planning for long-term care can save clients from financial stress and in the long run, provide asset protection for your clients.
For clients who choose to plan ahead, trusts and Long-Term Care Insurance are two popular options. Trusts can help preserve assets while allowing clients to qualify for Medicaid if necessary. While Long-Term Care Insurance can cover care costs with pricing that doesn’t deplete the client's estate.
For clients who prefer to wait and address long-term care needs when they arise, planning for Medicaid can be an alternative. This approach involves repositioning assets and income to qualify for Medicaid benefits, which can then cover the costs of long-term care services.
As a financial advisor, you can explain the benefits and drawbacks of each option, and in the case of Medicaid, help them understand the eligibility requirement, as well as recommend suitable insurance policies based on the client's needs and financial situation.
Asset-Map can help you build estate plans for your clients
Estate planning is so complicated because there are a lot of things to keep track of, especially if multiple people are involved in the process.
Asset-Map ensures that you have a bird’s eye view of all of your client’s assets and liabilities. Make sure that nothing falls through the cracks using an intuitive visual map.
Unlike the traditional reports that you’re used to, Asset-Map helps you display information in a way that makes sense for you and your clients. It acts as a visual aid during your client meetings so you can navigate through the complex conversations that usually happen during estate planning.
Schedule a demo today and see how it integrates into your unique workflow.