Estate planning is an oft-overlooked aspect of financial planning. After all, estate planning is generally viewed as either:
- Something for the 1% to worry about because they might pay estate taxes
- Complicated trusts that rich people hire lawyers to write up because they can
- Important, but too expensive to do right now
When viewed in this light, it’s clear why most people don’t view estate planning as very important. Instead of looking at estate planning as something for the 1%, it might be better to define what proper estate planning could look like for the 99%.
Let’s imagine comprehensive estate planning as: Deciding in advance what happens to you, your loved ones, and your assets when you can no longer speak for yourself.
If that’s the case, then it’s pretty clear that everyone should have a good estate plan to serve as a road map.
Let’s imagine you’re starting your first job out of college. All you have are student loans. having a simple will leaving everything to your parents is a place to start. As your life becomes more complex, estate planning’s importance becomes more obvious.
When you Google the term, “estate planner,” most of the search results come back with estate attorney listings. But estate attorneys aren’t the only people who can help you with your estate planning.
In fact, there are many aspects of a proper estate plan that the estate attorney can’t, or won’t, do. But if you’ve hired a financial advisor, that advisor is in a perfect position to help you maintain peace of mind.
But there are things that your financial advisor can, and should do to help you keep your estate plan intact. Here are seven of them.
1. Keeping Beneficiary Designations Up to Date
Your investment accounts, retirement accounts, and insurance policies have one thing in common: beneficiary designations.
Beneficiary designations tell the financial institution where the money goes when you’re dead.
Everything mentioned above should have beneficiary designations for several reasons. The most important reason is to bypass the probate process. In other words, your beneficiaries don’t have to wait for your attorney to file your will at the local courthouse. This takes time and money.
Why you need to review beneficiary designations regularly
Sometimes, things happen along the way.
- You set up an account without establishing a beneficiary designation. In the event of your death, the money will pass to your estate instead of a family member. This could be costly in the long run.
- The designations you established when opening the account or starting the policy are different from where you want the money to go today. Think of a situation where an ex-spouse gets the insurance money, even if the policyholder has remarried and has a new family. This happens often. And the ex-spouse never gives the money to the new spouse.
- Your beneficiary designations, by mistake or omission, leaves your accounts susceptible to creditors. Establishing proper beneficiaries could help provide an extra layer of creditor protection. If creditor protection is important, you should talk with a bankruptcy attorney.
- Your beneficiaries died before you, and your accounts don’t have contingent beneficiaries. This happens to many people with minor children. If this happens, it’s as if you didn’t have any designated beneficiaries at all.
You need someone to review your investment accounts and insurance policies. Your financial advisor is the right person to do this.
When your individual situation changes, your advisor can make appropriate recommendations. Your advisor should identify discrepancies between beneficiary designations and your estate planning documents. This will help you ensure they align with your financial goals.
A good financial advisor will review your beneficiary designations on a regular basis.
2. Providing a Second Look At Your Current Estate Planning Documents
Most people who establish estate planning documents view this as a one-time transaction. Many times, they assume that the documents reflect what’s going to happen.
Sometimes, that isn’t the case. This could be because things have changed. Perhaps the documents weren’t drawn up in the intended manner to begin with.
What estate planning documents do I have?
Many people don’t even know what estate documents they actually have. Your state laws might dictate how your documents look. Usually, most estate planning services will offer something like:
- Last will and testament
- Durable power of attorney
- Advanced health care directives
- Living will
- Trust (possibly, if your estate is complex enough to warrant one)
What do my estate planning documents say?
Even if you understand what estate planning documents you have, you might not understand them. And if you don’t understand them, you might not know whether they need to be updated.
This could be resolved if someone could:
- Help read and understand the document
- Put it into layman’s language
- Set aside time to discuss whether this is your intent
But lawyers charge by the hour. This puts off a lot of people, who don’t want to pay for their time.
Also, someone might feel as though this is ‘beneath’ the lawyer. That person might think it’s their own responsibility to understand the documents. After all, they paid for them.
Since this is private business, most people don’t want to discuss it with their friends and neighbors.
What many people need is someone who can be trusted with private matters. Moreover, they need to have a conversation that doesn’t involve “lawyer-speak.”
This is where the financial advisor comes in. Your financial advisor is already bound by your agreement to keep things private. There might be exceptions for when you give them permission or when legally required.
Legally, your advisor won’t give you specific advice. But they can help you go over your estate documents and point out situations where your plan might be at risk.
Your finances touch so many other aspects of your life. Thus, your advisor probably knows your intentions.
Having a conversation with your financial advisor should be like having someone holding the mirror in front of you. This will give you the opportunity to talk about what changes you’d like to make.
3. Pointing Out How Significant Life Changes Can Impact Your Estate Plan
To emphasize the previous point, your advisor should be aware of significant life events or changes.
If you trust your financial advisor, there isn’t one major life event in which you don’t call them. You might call to ask, “What does this do to my finances,” or “Will this affect my retirement planning?”
Assuming that your advisor is doing their job, then they should be able to point out how major changes impact your estate plan.
Some are obvious, like divorce or remarriage. Some are irreversible. This could include when to take Social Security benefits, or retirement pension decisions. Some are more subtle, like moving investment accounts (without updating beneficiary designations).
When these situations arise, it’s a good idea to call your advisor. And if they don’t get back to you quickly, then fire them and hire someone who will. That’s their job.
A good advisor will point these things out to you. And best of all, it won’t even feel like estate planning. It feels like someone keeping an eye on your financial situation.
4. Helping You Understand The Financial Impact of Changes You May Want to Make
Most people update their estate planning documents when they want to make a change. The process is simple:
- You go into the lawyer’s office
- You tell the lawyer what changes you want to make
- They draft a document reflecting the changes you want
- You sign the documents, putting them into force
The common theme here is you. Your lawyer might point out some things, or might have concerns about where you’re headed.
But in many of these cases, you might have already made up your mind. And if you’ve already decided, they will respect your wishes, and draft the documents.
Doing this might lead to serious problems.
The problems with reviewing your estate documents with your attorney
There are a couple of problems with this.
Your attorney likely won’t know the impact to your financial situation. You probably don’t have an in-depth relationship with your estate attorney. If that’s true, they don’t know how these changes will affect your finances. They know the law, but they don’t see the whole financial picture.
If you’re spending a couple of hundred dollars to draft “I love you” wills and powers of attorney, that’s a transactional relationship. That’s not the type of relationship that will help you discuss financial security.
If anything changes, it’s hard to revisit your documents.
Most lawyers charge by the hour, so that’s intimidating to most people. They’d rather do anything but revisit their documents with their estate attorney.
Conversely, your financial advisor should be able to:
- Discuss the changes you want to make
- Point out how those changes might impact your financial future
- Help you understand everything before you actually spend money putting it into writing.
5. Helping You Understand the Impact of Not Making Changes
This is another situation in which your estate attorney isn’t going to help you much.
First, if you have zero estate planning documents in place, you don’t have an estate attorney.
Second, if you have documents in place, then no one is going to tap you on the shoulder. And you might need a reminder to update your will when you get a divorce or get remarried.
That’s the nature of transactional relationships. You’re responsible for the changes you don’t make.
If you have a financial advisor, you should be seeing that person regularly. Even when things are fine, you should see your advisor at least annually.
A good financial advisor will check your estate plan to make sure everything is in order. And tapping you on the shoulder when you need to make changes.
6. Helping You and Your Loved Ones Do the Heavy Lifting When Things Change
When something significant happens, like a sudden family death, it can be paralyzing. While you’re struck with grief, sorrow, or any number of emotions, it seems as if the entire world has stopped. But it hasn’t, and there are things that still need to get done.
It’s times like these when you need someone who can help you:
- Focus on what needs to get done right away
- Figure out what can wait, and schedule it
- Get things done without having to do them yourself
A good financial advisor has a detailed plan for what needs to happen when either you or your spouse:
- Passes away
- Becomes incapacitated
- Needs medical care or long-term care
- Has a family member who dies or becomes incapacitated
You might think you’re on top of your game. But your financial advisor might know something that never even occurred to you.
This is important in households where one spouse does most of the financial work. The financial advisor proves their value when that spouse passes away or becomes ill.
7. Creating A Team of Professionals
Having the right people working as a team is so vital. Along with your tax advisor and a certified financial planner, an estate planner is a crucial part of that team.
Perhaps you’ve never worked with an estate attorney before. Maybe the one you hired before has long since retired. If that’s the case, you might not want to find your next attorney on Yelp.
Your financial advisor can help recommend a trustworthy estate attorney. Most advisors work with estate planners regularly. It’s very easy for them to recommend someone.
All you have to do is ask. And if you need the help, you might not even have to ask. Your advisor will be encouraging you to get started.
The bottom line is that no one wants to do estate planning. But it’s important. And it has to get done. By you.
You should recognize who plays an important role in your estate planning. Besides the folks who draft your legal documents.
Your financial advisor won’t give you legal advice. But they can help ensure your estate planning actions support your long-term goals.
After retiring from a 24-year career as a Naval officer in 2017, Forrest became a financial planner to help people achieve success in managing their personal finances. In 2022, he sold his partnership stake in his financial planning firm to focus on helping people full-time through his writing.
Featured in: Forrest’s writing has been featured in the following publications: Forbes, Military.com, NerdWallet, Yahoo Finance, The Military Guide, The Military Wallet, Christian Science Monitor, and many other publications.
If you have questions about the content, please feel free to reach out via email.