Perhaps your most valued clients are in their 50s, 60s, or even younger. They're in good health and not planning on dying. So, when should you recommend that they have "the talk" with their future executor and family about their wishes and instructions?
I've addressed the importance of estate organization and legacy discussions in prior articles, offering suggestions on why and how to best incorporate these topics into your practice. This month, I focus on the intra-family communication necessary to truly make wealth transfer successful. Herein, I'll refer to the family member who will one day have to settle your client's estate as "executor," even though the actual title may vary by state or personal situation.
Many people still aren't having what I like to call "the talk" with their future executor. While they recognize the importance of the conversation, they struggle with the overall approach and message. They may not understand the legal documents that have been created for them, and are fearful of looking ignorant.
Advisors looking to elevate their valued client relationships ought to consider asking their most valued clients to commit to having the talk with future executors this year. Here's how to help your clients get the know-how and courage they need to pull it off.
All of your clients with an existing estate plan ought to be having the talk. Even those who don't have one but are working on it should have the talk. Ask your client if he understands his estate plan. If not, plan a follow-up conversation with the estate attorney to give him confidence.
Ask your client to commit to the talk sooner rather than later and offer to follow up with him in periodic intervals to ensure that he has scheduled it. Set the expectation that this is not a one-time, one-way conversation with the executor, but rather opening the door to an interaction that will become much more comfortable over time.
What to say to a future executor
Here's what advisors should tell clients to say, according to financial planner, estate expert, and author Myra Salzer: "I'm doing my estate plan and there has to be an executor. This is what's involved and I'd like you to consider helping me. I also want you to know that if at any time this is too much of a burden for you, that you don't have to do this. I can find someone else."
Instructing clients to leave their executor an out is very important, Salzer says.
"The biggest disservice one can do in appointing an executor is not giving them a way to decline," Salzer says. "For example, if the future executor is being treated for cancer, it's a burden to take on the role of executor as well, especially if there is no planning or warning of death."
You need to outline all of the duties of an executor for your client, so he can in turn, address the topic with his appointee -- distribute assets according to law, pay off debts, handle insurance policies, take an inventory of assets that need to be dealt with, and handle the sale of the house or belongings, among others. He will need to give the executor future access to a myriad of individuals, such as the insurance agent, family attorney, accountant, and things like his safe-deposit box, house keys, car keys, etc.
The next thing for your client to discuss with his future executor is how everything needs to be distributed. Much of this should be set out in the client's will or trust documents, but certain things should be addressed in detail, even to the point of asking the future executor if he/she is comfortable with receiving something.
What to say to intended beneficiaries
It's better for your client to have somewhat superficial conversations with his family or intended beneficiaries about what's important. Don't advise him to start some sort of sordid auction about who wants what. Instead, have him feel out each beneficiary individually with a light question.
"What's important to some may not be important to others. For example, your client might have a collection of restored antique paintings, but not all of his heirs may appreciate them as your client does. It's interesting how some people relate to things with historic value while others are future-based and couldn't be bothered with restoring pictures."
Another example Salzer gives: Your client may have a motorcycle left over from his midlife crisis and would like to give it to his 16-year-old grandson who salivates at the very thought of that Harley. He wants to make the kid happy, right? But if he doesn't discuss how the teen's parents might think of such a gift, he could be setting up a big family fight.
Tell your client to expect most issues to arise over things with sentimental value, such as family photos and heirlooms that may have no marketable value.
"Having the talk gets things above board. It gives the beneficiaries or heirs the opportunity to communicate with the estate holder," Salzer says.
Once your client gets feedback from his heirs, decisions can be made or revisited on who gets what through the will or trust documents. From there, further discussions with the executor can be held. The objective is to set realistic expectations about responsibilities and changes to the contacts or requisite information.
Advisors can take a "teach-me-how" approach with valued clients or even offer to facilitate the talk. The former works especially well if you have your client preface the conversation by saying "I've been working with my financial advisor, and he recommended that I have this conversation with you."
By getting your client to commit to execute on something he wouldn't likely do on his own, and providing the necessary follow up, you can give your client and his family peace of mind while generating loyalty and opening the door to multi-generational relationships.
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