When people get serious about financial planning, estate planning is one part of the process that is often overlooked. People tend not to worry about it because they think they don’t yet have enough money for it to be important. Or they think that it’s not necessary to do anything about it right now.
Nevertheless, estate planning is not only for the top 1% of earners in the U.S. Instead, people need to realize that it’s really about figuring out ahead of time what should happen to you and your loved ones and your assets when you are no longer able to make those decisions. For this reason, everyone should have an estate plan.
While an estate attorney plays an important part in drawing up estate plans, there are many aspects that an attorney can’t or won’t cover. Let’s take a look at a few areas where a good financial advisor can help with estate planning.
One of the main advantages to working with a financial advisor is how he or she can structure your retirement plans. A financial planner can set up IRAs (and Roth lRAs), 401(k)s, and other retirement accounts. More importantly, he or she can help you understand the different laws that control who can inherit certain assets and how they confer tax benefits for beneficiaries.
For instance, an IRA has specific rules for children that inherit their parent’s IRAs. In addition, they can opt to have their inherited assets grow tax free over a certain time period. A knowledgeable financial planner can discuss these options with you to formulate a retirement plan that coheres with your estate plan.
Keeping Beneficiary Designations Current
Because most estate plans have a mix of retirement accounts, investment accounts, and insurance policies (all of which have beneficiary designations), it’s important to keep the beneficiaries in your estate plan up to date. This becomes even more significant when you have a family or life change that impacts who you intend to inherit your assets.
Unlike attorneys, financial advisors meet with their clients on a fairly regular basis to discuss the status of their portfolio. As a result, your financial advisor should have current knowledge regarding any family changes such as a birth, a marriage, or a death. Therefore, your financial advisor is in the best position to to update your beneficiaries with your attorney. Furthermore, your advisor can identify any discrepancies between your beneficiary designations and your estate planning documents and help to resolve them.
Long-term Care Planning
Another consequential aspect of estate planning is dealing with long-term care. While some people may prefer to plan ahead with long-term care insurance or special trusts, others may wait to try Medicaid planning when they need care. Regardless of which route you choose, a financial planner can lay out the financial implications of various long-term care plans and work to find a solution that fits your situation.
Helping You Make the Right Changes in Tough Times
When a significant life change occurs, such as a death in the family, it can be very difficult to take action. Although family members may be dealing with their sorrow and their grief, important decisions still have to be made. During these tough times, it helps to have someone outside the family to provide guidance. A good financial advisor can figure out what steps need to be taken regarding estate plans when someone dies, becomes incapacitated, or has a loved one who dies or becomes incapacitated.
Especially in families where one spouse has dealt with most of the finances, an experienced financial advisor can step in when that spouse dies or becomes unable to make decisions and make sure that their estate plan remains intact. In times like these, you need someone who, as financial planner John Savadjian says, “consistently puts his clients’ interest ahead of his own.”
While financial advisors cannot give you legal advice, they still play a critical role in estate planning because they are familiar with your overall financial situation and your goals. For this reason, they are uniquely positioned to make sure that your estate planning actions reflect your estate planning wishes.