When it comes to financial planning, most people focus on saving, investing, and reducing debt. But one often-overlooked detail can have a major impact on your generational wealth: beneficiary designations. Whether it’s a retirement account, life insurance policy, or bank account, these designations dictate who receives your assets when you pass away—sometimes regardless of what your will says.
And that’s exactly why you need to review them periodically.
Wills Don’t Override Beneficiary Forms
Many people assume their will controls everything, but that’s not the case. Beneficiary designations on accounts like IRAs, 401(k)s, and life insurance policies are legally binding. If they don’t align with your will, the designation on file takes precedence. That can lead to unexpected—and sometimes painful—surprises for surviving loved ones.
Avoid Probate and Legal Conflicts
Assets with named beneficiaries typically bypass probate, meaning they transfer directly to the designated individual. That’s a good thing—but only if the designations are accurate. Outdated or incorrect forms can create confusion, legal disputes, and delays that add stress during an already difficult time.
Life Changes, and So Should Your Beneficiaries
Marriage, divorce, births, deaths, changes in your relationships, and even changes in your children’s relationships can all affect who you want to inherit your assets. For example, if you named a spouse as your beneficiary and later divorced, forgetting to update that designation could mean they still receive your funds—despite your current wishes. Similarly, if you welcomed a new child or grandchild, they might be unintentionally left out.
That’s why we recommend reviewing your beneficiary designations at least once every two to three years, or whenever there’s a major life event. Check all relevant accounts—retirement plans, life insurance policies, bank and brokerage accounts—and confirm not only that the right people are listed, but also that their contact information is current.
Your beneficiary designations are a small step that offers significant peace of mind— by reviewing them regularly you could save your loved ones from many headaches and lots of legal fees down the road.
The recent tragic death of Liam Payne, a member of the music band “One Direction”, once again highlighted why every parent needs an estate plan. Liam died last year at the age of 31, leaving behind a young son and an estate of roughly $32 million without a will. So, Liam’s assets would most likely be divided by a court based on applicable laws. The court will also appoint guardian(s) for his minor son. These arrangements may or may not be what Liam Payne wants. We never know.
In the United States, over half of adults don’t have a will. Many people think estate planning is for the wealthy or the elderly. This couldn’t be further from the truth. In fact, estate planning is a fundamental act of responsibility and love — especially for parents. At the heart of any estate plan is the well-being of your children. Think about it: if something were to happen to you tomorrow, who would raise your kids? That sounds terrible, but without a legal will or guardianship designation, the court decides — not you. The process can be lengthy and may result in a guardian you wouldn’t have chosen. Naming a trusted guardian ensures your children are raised by someone who shares your values and parenting style.
An estate plan allows you to designate how your assets — such as savings, home equity, and life insurance — will be managed and distributed. Without a plan, your estate may go through probate, a time-consuming and potentially expensive legal process. Worse, your children could receive their inheritance in a lump sum at 18, without the maturity to manage it wisely.
Grief and stress can bring out the worst in people. An estate plan reduces ambiguity and prevents confusion or disagreements about your wishes. Clearly defined plans about guardianship, inheritance, and personal possessions can protect family relationships during an already difficult time.
Knowing that your children will be cared for emotionally, physically, and financially — no matter what — is a powerful source of peace. An estate plan gives you that peace. One of the reasons people don’t get around to estate planning is that the task seems too overwhelming and they don’t know where to start. That’s why we developed estate plan review and implementation checklists and break them into chunks for our clients to get their plan in order. We can also act as our clients’ resource and help them find the right people they need for additional expertise and assistance on completing their estate plan.
Parenthood is about planning ahead — whether it’s for your child’s first steps or their college education. Estate planning is one more crucial way to ensure you’re prepared. It’s not just about wealth distribution; it’s about protecting what matters most: your children, your values, and your peace of mind.
Every parent, regardless of income or assets, needs an estate plan. Don’t wait for a crisis to force your hand. Start the conversation now — because your family deserves a secure future.
In 2019 I wrote an article with the title “What role does your financial advisor play in estate planning process?” Now I would like to revisit this topic given that Coronavirus pandemic has brought estate planning front and center to the minds of many people old and young.
In the past, when the words “estate planning” came up, most people would conjure up an image of an old, super wealthy man, pondering plans about who will get his enormous amount of fortune after he is gone. There are a couple of inaccuracies with this image. First of all, estate planning is not only about dealing with one’s monetary assets. Second, estate planning is critical and beneficial not just for older people.
So, what is estate planning? It involves using wills, trusts, insurance policies, and other legal documents to give instructions on what happens to your personal property, your tax, care of your young children and/or pets, and if any, your health care arrangements and final arrangements upon your death, etc.
Then, what role does a financial advisor play in her client’s estate
planning process?
A financial advisor can help clients create plans that truly reflect their values, goals, and wishes with consideration of their overall financial situations.
Experienced financial advisors know that having estate planning documents do
not always mean that a person’s estate planning goals are accomplished. Does
the plan achieve what one wants to leave behind? A financial advisor knows a
client and his/her family well and will take consideration of client’s overall
situation in clarifying and prioritizing client’s goals and objectives before
wills and trusts are drafted.
A financial advisor helps ensure continued success of client’s estate plan.
Estate planning is a dynamic process. Estate planning does not end after a
client sign the estate planning documents. A financial advisor helps clients
identify proper assets to fund their estate plan, designate and update
beneficiary, review their situations annually and work closely with attorneys
to update any changes in client’s family situations in the estate planning
documents.
A financial advisor can reduce client’s mistakes and save them costs by increasing the chance that client’s estate plan will be carried out successfully.
An estate plan is not successful if client’s estate plan is not carried out
as intended. Working with attorneys, a financial advisor can help ensure
client’s assets are transferred properly by avoiding mistakes and minimizing
administrative costs at death. Also, in some cases an advisor can help client’s
intended beneficiaries locate and account for the assets they previously might
not know of.
It is probably true that nobody wants to talk about his or her own death.
But, let’s be honest, by avoiding and delaying this important planning, one
simply does disservice to their loved ones. The pandemic taught us some
valuable lessons. So, stop delay and start planning.
I call the period that runs from every September to next May college application season for high school seniors across the country. The 2020/21 college application season is almost over. Now it is time for most high school seniors to weigh the offers and envision the lives they will be living for the next four years.
This is a time of excitement as well as anxieties for both students and their families. As parents of soon-to-be college freshmen, they all want their children to have four successful college years. But, I know that “success” is a highly subjective word. And student’s college experiences may be different due to the kind of colleges or universities they attend.
So, first let us define what
success in college means. Success in college, according to many college
students themselves, means achieving good grades, graduating on time, maintaining
a balanced social life and landing a good job after graduation. On the surface,
these goals seem to be simple and easy to achieve, right? In reality, however,
there is no small number of students either struggle academically or have a
hard time fitting in socially.
After perusing books and articles
related to this subject and talking to some parents whose kids have already
gone through colleges, I found out some universal traits of college students
who have had positive experiences during college.
The first trait of such a student
is having definite goals for life. I cannot stress enough of the importance for
a college student to have definite goals for his or her life. But, there is a
caveat. The goals should be what the students truly want for themselves, not
the goals their parents or society set for them. Lucky are those who have
concrete goals even before they set foot on college campuses. These students
are motivated, self-driven and confident. They will seek and even create the
kind of college experiences that help them achieve these goals.
The second trait of a successful college student is having a good amount of self-control. The majority of high school seniors will leave their childhood homes and live in some kind of campus housing arrangements for the first time. No longer in their lives will there be nagging about eating healthy food and finishing their homework on time. At the same time, they are constantly facing the tasks of making choices: going to parties or working on that course assignment which is due very soon, eating healthy meals or eating whatever they want, and etc. Life is about trade offs. College life is no exception. The students who have successful college lives are those who are able to make good decisions most of the time. Generally speaking, making good decisions need good amounts of self-control.
The third trait of a successful college student is the possession of good study skills. Academics are a big part of college life. It is hard to believe that a college student is having a positive experience when he or she struggles academically. For students who lack confidence in this skill set, I would like to share with them the formula for academic success outlined in Purdue University’s Guide to Creating a Successful College Experience:
Read the syllabus
Go to every class
Sit near the frontin class
Find a study partneror group in every class
Take good notes.
At the beginning of each semester, ask yourself:
Do I understand what is expected of me in each class?
Do I have contact information for someone in every class to study with or contact in case I’m sick?
Manage your time wisely
Never let a week go by where you don’t understand the content in your courses
If you are confused or lost in a class, visit your professor, go to a help lab or study with a friend. Use your campus resources — they are there to help you
Study 2 hours for every hour you are in class
The fourth trait of a successful
college student is getting involved in a wide range of activities. We know that
college success is more than just good grades. Activities outside classrooms not
only enrich students’ lives, they also help students explore their interests,
develop social skills and possibly gain life-long friendships. Some of the
activities include volunteering, working part-time on campus, getting involved
in student’s residence hall, doing internships or studying abroad.
In addition to the above four traits, another factor affecting students’ college experiences is the emotional support or lack of it from their families. College years are coincident with a person’s transition period to adulthood. And this transition period is filled with stresses and struggles. In Janet Hibbs and Anthony Rostain’s apt named book – “The Stressed Years of Their Lives”, they talked about the mental problems facing today’s college students. Alarmingly, almost one-third of all college students report having felt so depressed that they had trouble functioning in the last twelve months according to the authors. Although so called “helicopter parents” are mocked and discouraged, this does not mean that parents can stay out of their college-age children’s lives other than writing tuition checks.
Before parents send off their children to college, they need to be aware of two important laws that could be critical to their children’s well beings. They are HIPAA and FERPA. HIPAA stands for Health Insurance Portability and Accountability Act. HIPAA protects a person’s confidential health information. FERPA stands for the Federal Educational Rights and Privacy Act of 1974. FERPA was designed to protect the privacy of educational records and to give students the right to inspect and review their educational records (collegiateparent.com).
In most states 18 is the legal age of majority, which means most college students’ health information and academic records are protected under law and not shared with their parents without the students’ consent. By checking the students’ academic records parents could detect early signs of their children’s mental issues. In order to access their students’ transcripts parents need a consent form to disclosure of FERPA protected academic records. In the age of Covid-19, it is also important for parents to have signed HIPAA waiver and health care proxy from their college-age children in order to make medical decisions on their children’s behalf. If parents need more information on these forms they can contact their financial advisors and/or family attorneys for help.
Looking back, 2020/21 college application process is quite a journey for both high school seniors and their families amid a global pandemic. As the high school seniors are about to open a new chapter of their lives, I wish them all successes in college.
2020 is finally behind us. What is your plan for year 2021? Here I outlined some financial tips for you to put on your early 2021 to-do list to jump start the year to be a successful and prosperous one for you and your loved ones. Below are some of the essential personal financial information you will want to save and keep in handy as your reference guide throughout the year.
Adjust your retirement plan contributions for 2021
2021 retirement plan contribution limits
Plan
Maximum Deferral
Age 50 and Over Catch-up Contribution
401(k)/403(b)
$19,500
$6,500
Deductible IRA
$6,000
$1,000
Non-Deductible IRA
$6,000
$1,000
Roth IRA
$6,000
$1,000
The individual IRA contribution deadline for 2020 is April 15, 2021.
Phase out range for deductible IRA is $105,000-$125,000 for joint filing if covered by a workplace retirement plan; Phase out range for Roth IRA is modified AGI from $198,000-208,000 for joint filers.
Health Savings Account Contribution Limit for 2021:
Self-only
Family Coverage
Contribution Limit
$3600
$7200
Contribution Limit over age 55
$4600
$8200
High-deductible health plan minimum deductible
$1400
$2800
High-deductible health plan out-of-pocket maximum
$7000
$14,000
Keep in mind these important income tax facts for 2021:
2021 Income Tax Brackets and Rates:
Tax Bracket
Single Filer Income Range
Married File Jointly Income Range
10%
$9,950 or less
$19,900 or less
12%
$9,951- $40,525
$19,901 – $81,050
22%
$40,526 and $86,375
$81,051 and $172,750
24%
$86,376 and $164,925
$172,751 and $329,850
32%
$164,926 and $209,425
$329,851 and $418,850
35%
$209,426 and $523,600
$418,851 and $628,300
37%
$523,601 or more
$628,301 or more
The standard deduction
is $12,550 for individuals and $25,100 for married couples filing jointly.
2021 Alternative Minimum Tax (AMT) Exemption Amounts:
Single or Head of Household
Married File Jointly or Qualified Widow
Married File Separately
Maximum Exemption
$ 73,600
$ 114,600
$ 57,300
25% reduction if over:
523,600
1,047,200
523,600
Exemption Eliminated
818,000
1,505,600
752,800
2021 Qualified Dividend and Long-term Capital Gain Tax Rate:
Income Range: Single filer
Income Range: Married file jointly
Capital Gain Tax Rate
$0-$40,400
$0-$80,800
0%
$40,401-$445,850
$80,801-$501,600
15%
Over $445,850
Over $501,600
20%
Net Investment Income Tax:
Individuals will owe the tax if they have Net Investment
Income and also have modified adjusted gross income over the following
thresholds:
Filing Status
Threshold Amount
Married filing jointly
$250,000
Married filing separately
$125,000
Head of household (with qualifying person)
$200,000
Qualifying widow(er) with dependent child
$250,000
Single
$200,000
The Net Investment
Income Tax (NIIT) applies at a rate of 3.8% to certain net investment income of
individuals, estates and trusts that have income above the statutory threshold
amounts.
Annual Exclusion for Estates and Gifts
In 2021, the first $15,000 of gifts to any person
is excluded from tax.
Since 2018, the Tax Cuts and Jobs Act temporarily increased the basic exclusion amount for estate and gift taxes for tax years 2018 through 2025, with both dollar amounts adjusted for inflation. For 2021 the exclusion amount is $11,700,000 per individual, and $23,400,000 for a couple.
Review your Insurance policies
If your situation has changed during 2020, such as change of job, birth of a new child, or purchases of new car, house, etc., you need to review your insurance coverage or talk to your financial adviser to help you come up with proper coverage amount for your current insurance needs.
Don’t forget the deadline for individual tax filing is Thursday
April 15, 2021.
Gather and organize all your
paperwork such as W-2 forms, bank statements, mortgage payment statements,
property tax receipt, business expenses, investment statements from your
broker-dealers, charity donation receipts, etc. for your 2020 tax filing.
A couple of events that you might want to keep an eye on:
House Ways and Means Committee Chairman Richard Neal plans to reintroduce in the new Congress the Securing a Strong Retirement Act of 2020, which would boost the required minimum distribution age from 72 to 75. In 2019, the Secure Act passed by congress has pushed the age that retirement plan participants need to take the required minimum distributions (RMD) from 701/2 to 72. If this new bill passes, it would create more favorable financial planning opportunities to people contributing to various retirement plans.
Another thing to watch for is for families with kids applying for college in the fall 2021. The dates and places of taking the SAT/ACT had been changed a couple of times last year by the institutions which offer these tests due to the pandemic. Since the pandemic is still going on parents need to make sure their high school kids know the exact dates and places of taking these tests. Parents and students can go to www.collegeboard.org to check out the latest updates on SAT test or www.act.org for ACT tests.
For many in the generation X and millennial age groups they tend to have some misconceptions and procrastinate when it comes to estate planning.
The first misconception about estate planning gen X and millennial hold is that estate planning is for older folks. The second misconception is that estate planning is only about monetary assets; therefore, people with few financial assets need not to bother with it.
In fact, there is nothing further more from the truth than these misunderstandings. Estate planning is critical and beneficial for people old and young, and even more so in light of the current pandemic crisis we are in. Since the breakout of coronavirus pandemic some gen X and older millennial started to have sense of urgency and concerns about the lack of estate planning. They are concerned about what will happen to them and their family if they become seriously ill or worse.
So, what is estate planning? It involves using wills, trusts, insurance policies, and other legal documents to give instructions on what happens to your personal property, your tax, care of your young children and/or pets, your health care arrangements and final arrangements upon your death, etc.
As more and more states reopen after “lock down” people gradually venture out and ease back to “normal” life. Still, many people are cautious and avoid “non-essential” human interactions as much as possible.
Traditionally, in order for a will to be valid in Texas, a typewritten will must be signed by the person who makes the will and two witnesses must be in presence. In these difficult times, this requirement poses great challenges for many including gen X and millennial who have never had these estate planning documents in place and need to set them up right now. So, what can a gen X or millennial in need of an enforceable will do while observing social distancing?
Though in July of 2019 the Uniform
Law Commission has approved the Uniform Electronic Wills Act, also known as the
E-Wills Act, which allows probate courts to recognize electronic estate
documents as being fully valid and enforceable, no state has enacted this law
yet, unfortunately.
On April 8, 2020, Governor Abbott issued an order temporarily allowing regular notaries to notarize the following documents by video conference: durable powers of attorney, medical powers of attorney, directives to physicians, and self-proving affidavits for Wills.
The above order, however, does not eliminate the requirements for witnesses to be physically present. This suspension is in effect until terminated by the Office of the Governor or until the March 13, 2020 disaster declaration is lifted or expires. Documents executed while this suspension is in effect, and in accordance with its terms, shall remain valid after the termination of this suspension.
Further more, according to the announcements published on the website of the Texas Secretary of State, the following conditions shall apply whenever this suspension is invoked:
A notary public shall verify the identity of a person signing a document at the time the signature is taken by using two-way video and audio conference technology.
A notary public may verify identity by personal knowledge of the signing person, or by analysis based on the signing person’s remote presentation of a government-issued identification credential, including a passport or driver’s license that contains the signature and a photograph of the person.
The signing person shall transmit by fax or electronic means a legible copy of the signed document to the notary public, who may notarize the transmitted copy and then transmit the notarized copy back to the signing person by fax or electronic means, at which point the notarization is valid.
Alternatively, a holograph will can
be used in place of typewritten one in emergency situations. A holographic will
is a handwritten will which is made by a person, or in legal term a testator,
entirely in the testator’s own handwriting and signed and dated by the
testator.
Another valuable tool in a person’s estate planning repertoire is letter of intent. Letter of intent is not a legal document per se, but it is an invaluable piece of your estate planning documents. It usually complements a person’s will. As the name implies you can use this document to tell your loved ones what your assets are, where to locate them and how to access them, etc. You can specify your non financial wishes in this document as well.
Comparing with older people, gen X and millennial have relatively simpler estate planning needs, and the above planning techniques can be some of the options gen X and millennial utilize during these unprecedented times. After the society fully returns to its pre-pandemic way of life, gen X and millennial can revise and expand these documents with the aid of an advisor and/or lawyer.
What are your financial moves in year 2020? First, I think you need to start by checking out a legislation called the Setting Every Community Up for Retirement Enhancement (Secure) Act of 2019, which is effective on January 1, 2020. In this article, I will outline some of the key changes in the Act and how these changes may impact a person’s retirement, college and/or estate planning.
The following are some positive changes coming out of the Secure Act:
The Act allows families to pay for up to $10,000 in student loans tax free using the money in their 529 college savings plans.
The Act has pushed back the age that retirement plan participants need to take the required minimum distributions (RMD) from 701/2 to 72.
The Act encourages retirement plan sponsors to include annuity as an option in their plans by reducing plan sponsor’s liability if the insurer which sells annuity fails to meet its financial obligations.
The Act states that any employer who creates a 401(K) or SIMPLE IRA plan with automatic enrollment will get a maximum tax credit of $500 per year.
The Act also makes it easier for small businesses to set up 401(K) plans.
Now, on to some of the negative changes brought by the Secure Act:
The Act
mandates that inherited IRAs for non-spouse beneficiaries must be distributed
over 10 years.
The
changes for the age that requires RMD from 701/2 to 72 creates confusions among
individuals who attain age 701/2 in 2019 or 2020.
In order to minimize the confusion, the IRS issued Notice 2020-6 saying
that the Secure Act did not change the required beginning date for IRA owners
who attained age 701/2 prior to January 1, 2020. Given its significance, the
first thing I suggest you to do is to learn more of this Secure Act and plan
accordingly based on your individual situations.
Second, you need to know updated retirement and Health Savings Account
contribution limits for 2020 and adjust your own contributions accordingly.
According to the Internal Revenue Service the contribution limit for employees
who participate in 401(k), 403(b), most 457 plans, and the federal government’s
Thrift Savings Plan is increased from $19,000 to $19,500. The catch-up
contribution limit for employees aged 50 and over who participate in these
plans is increased from $6,000 to $6,500. The limitation regarding SIMPLE
retirement accounts for 2020 is increased to $13,500.
Taxpayers can deduct contributions to a traditional IRA if they meet
certain conditions. If during the year either the taxpayer or his or her spouse
was covered by a retirement plan at work, the deduction may be reduced, or phased
out, until it is eliminated, depending on filing status and income. (If neither
the taxpayer nor his or her spouse is covered by a retirement plan at work, the
phase-outs of the deduction do not apply.) Here are the phase-out ranges for
2020:
For single
taxpayers covered by a workplace retirement plan, the phase-out range is
$65,000 to $75,000.
For
married couples filing jointly, where the spouse making the IRA contribution is
covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000.
For an
IRA contributor who is not covered by a workplace retirement plan and is
married to someone who is covered, the deduction is phased out if the couple’s
income is between $196,000 and $206,000.
For a
married individual filing a separate return who is covered by a workplace
retirement plan, the phase-out range is not subject to an annual cost-of-living
adjustment and remains $0 to $10,000.
The limit on annual contributions to an IRA remains unchanged at $6,000.
The additional catch-up contribution limit for individuals aged 50 and over remains
at $1,000. The income phase-out range for taxpayers making contributions to a
Roth IRA is $124,000 to $139,000 for singles and heads of household. For
married couples filing jointly, the income phase-out range is $196,000 to
$206,000.
The income limit for the Saver’s Credit (also known as the Retirement
Savings Contributions Credit) for low- and moderate-income workers is $65,000
for married couples filing jointly; $48,750 for heads of household; and $32,500
for singles and married individuals filing separately.
Annual HSA contributions for 2020
for individuals with family coverage are increased from $7000 to $7100. Account
holders ages 55 or older can contribute an additional $1,000. However, in order
to qualify for the contribution, a person must be enrolled in one of employer
sponsored HSA-qualified high deductible high premium health insurance plans.
In 2020, the annual exclusion
for gift tax is still the first $15,000 of gifts to any individual.
One night in March this year, our nine-month-old puppy was enjoying his favorite treat-beef trachea. All of a sudden, he started licking his lips and pacing up and down, unsettled. It turned out that he swallowed a big piece of the trachea without chewing it sufficiently, and the piece blocked his esophagus. We took him to an animal clinic that can perform an endoscopic procedure to get the trachea out. With pet health insurance, the whole procedure would cost us only several hundred dollars. Without pet insurance, however, it would set us back several thousand dollars. The surgery was successful. Now, my puppy has fully recovered. He is sleeping sound and well as I am writing this article.
Americans are pet lovers. More than 80% of Americans regard pets as their family members. Sadly, sometimes pets suffer from their owners’ lack of forethought and planning. We see dogs and cats not getting proper care or medical treatments because of financial trade-offs. We see dogs become homeless after their owners’ deaths. Therefore, a little planning before hand can prevent heartbreaking situations for our pets.
Pet Insurances
Before adopting a pet, think about the time and money you
can commit. Do you have to alter your current lifestyle a little bit or a lot?
Are you willing to change? What about the financial consequences? Take, for
example, the case of owning a dog. Some breeds of dog could incur a large
amount of medical bills down the road. One way to mitigate the financial burden
is to buy pet insurance. Do a cost/benefit analysis. Does it make sense to buy
pet health insurance in your individual situation? Many pet insurances only
cover cats and dogs, but a couple of insurers will also cover birds and
reptiles. Before you purchase health insurance for your pet, be sure you
understand what covered and excluded conditions are and how you file an
insurance claim. Many pet insurance companies put their sample insurance policies
on their websites. Locate these policies and read them carefully.
Setting Up Companion Animal (Pet) Trusts
Our pets bring us joys and companionship, but they also
depend on us for continuous care. How to provide such care in case we are not able
to? Pet trust can be a valuable tool for pet owners to do so. So far, all 50
states of the U.S have passed laws allowing pet owners to set up trusts for
their companion pets. While considering setting up a trust for your pet, it is
a good practice to designate different parties as caregiver of your pet and trustee
that administer the funds in the trust for pet respectively.
Alternatively, pet owners can opt for a pet protection agreement,
which is simpler than setting up pet trusts, to protect their pets. With a pet
protection agreement, pet owners can name their pets’ guardians, leaving funds,
and providing instructions for how to care for your pets when you are not
around.
Talk to your advisor or lawyer about how to include pets in
your financial plan. Don’t let our four-legged family members suffer from the
consequences of our lack of planning.
What comes to your mind when the words “estate planning” are mentioned? I bet many would conjure up an image of an old, super wealthy man, pondering plans with his lawyers about who will get his enormous amount of fortune after he is gone. There are a couple of inaccuracies with this image. First of all, estate planning is not only about dealing with one’s monetary assets. Second, estate planning is critical and beneficial not just for older people.
So, what is estate planning? It involves using wills,
trusts, insurance policies, and other legal documents to give instructions on
what happens to your personal property, your tax, care of your young children
and/or pets, if any, your health care arrangements and final arrangements upon your
death, etc.
Then, what role does a financial advisor play in her client’s estate planning process?
A financial advisor can help clients create plans that truly reflect their values, goals, and wishes with consideration of their overall financial situations.
Experienced financial advisors know that having estate planning documents do not always mean that a person’s estate planning goals are accomplished. Does the plan achieve what one wants to leave behind? A financial advisor knows a client and his/her family well and will take consideration of client’s overall situation in clarifying and prioritizing client’s goals and objectives before going to estate law attorney.
A financial advisor helps ensure continued success of client’s estate plan.
Estate planning is a dynamic process. Estate planning does not end after a client sign the estate planning documents. A financial advisor helps clients identify proper assets to fund their estate plan, designate and update beneficiary, review their situations annually and work closely with attorneys to update any changes in client’s family situations in the estate planning documents.
A financial advisor can reduce client’s mistakes and save them costs by increasing the chance that client’s estate plan will be carried out successfully.
An estate plan is not successful if client’s estate plan is not carried out as intended. Working with attorneys, a financial advisor can help ensure client’s assets are transferred properly by avoiding mistakes and minimizing administrative costs at death. Also, in some cases an advisor can help client’s intended beneficiaries locate and account for the assets they previously might not know of.
It is probably true that nobody wants to talk about his or her own death. But, let’s be honest, by avoiding and delaying this important planning, one simply does disservice to their loved ones. So, stop delay and start planning.
