You’re sitting with your client going over their needs. You ask them about their legacy and estate plan, and they respond, “I have a will.”
That’s a great start, but your client is likely missing some of the pieces needed for a successful estate plan. Here’s some common mistakes and how advisors can help get their clients back on track.
- Not having a will – If your client doesn’t have a will, they are not alone. According to a BMO Wealth Management study, 52 percent of Americans have not made a will. Helping your client create a will can help facilitate difficult but necessary conversations and build a foundation for a successful estate plan.
- Having only a will – An estate plan and a will are not the same thing. A will is necessary for a good estate plan, however, it’s not the only document needed. Keep on top of clients who think a will is enough. Urge them to setup plans for other contingencies like a power of attorney and medical directives.
- Not setting up a power of attorney and/or medical directives – Clients sometimes mistakenly believe that a will covers these more specific decisions about medical care and wishes. Setting up a will is a great time to discuss this with clients and set the record straight, if needed. Make sure they understand a will is about property, not about them.
Mark Smith, president of Vision Wealth Planning said, “The financial powers and medical powers can become more important than a will. When someone dies, settling their affairs is a big task, but other than funeral arrangements you are not dealing with them. If that person becomes incapacitated, you now have to handle their affairs and them. This can be an emotionally overwhelming task, even with the right documents in place. Not having the documents in place and having to go to court to get guardianship makes it all the more difficult.”
- IRAs and 401(k)s – Contrary to what your client might believe, IRAs and 401(k)s transfer outside of wills. Which means even if a will designates that all your assets be passed to a certain loved one, if they are not the beneficiary to those accounts, they will not be the one to receive those funds.
- Not updating beneficiaries – Life changes like divorce should be a catalyst for advisors to talk to their clients about updating their beneficiaries. When advisors meet with clients, they should find out what’s new and if there’s been any life changes that require other documents to be updated.
- Access to estate plan documents – It seems pretty obvious, but make sure someone other than your client has access to account information and where the documents are stored. Make sure they are kept in a safe place, but be sure their spouse or loved one can access it.
To motivate your client to pursue an all-encompassing estate plan, remind them of the advantages they provide, according to Gregory Kurinec of Bentron Financial Group in Downers Grove, Ill.
“The biggest advantage to estate planning is determining who will speak for you if you are no longer able to speak for yourself. This can be due to death or incapacitation while you are alive. It also lets you determine how you would like to have your estate distributed after you pass. It does not allow the courts to deem what is fair. I think it’s fair to say that most of us would like to have control over who gets our things when we are gone.”
AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.