As financial advisors, I’ve always said that we must practice what we preach. I say this because the harsh reality is that most professionals don’t always have their own personal house in order. For example, when you drive by the homes of most landscapers, their yards are usually not immaculate. If you visit the house of a painter, its paint job isn’t necessarily comparable to that of a model home. Although we see doctors regularly to maintain our health, if you visit the home of most doctors, you will see they don’t always eat, drink, or exercise in a way that promotes a perfectly healthy lifestyle.
So, it should come as no surprise that, just like our clients, most financial advisors — even estate planning attorneys — don’t have their estate planning house in order. Some have a will, but it is often out of date. Some may have a trust, but it is not always properly funded. Some may experience major life events, such as new children or grandchildren in the estate, a divorce, a remarriage, the marriage of a child, the receipt of an inheritance, or the loss of a loved one, but they may not have made adjustments to reflect their changing estate planning needs and objectives.
So, here are the three main points I hope you take away from this article:
First, we really need to take a look at our own practice first and practice what we preach. Make sure your personal estate plan is established properly, and kept up-to-date. The is not only the right thing to do for you and your family, but it also allows you to gain credibility with your clients by explaining to them what you’ve done, showing them your personal documents and details, letting them know that you’ve been there, and that you’ve accomplished all of this because you know it is an integral part of every financial plan.
Second, discussing the basics with clients and prospective clients about how wills and living trusts work, will help:
- Strengthen the financial plans of your existing clients
- Discover new opportunities to help your clients through regular estate planning reviews
- Since a complete estate plan must be coordinated with all aspects of your clients; financial lives, this means that it must be coordinated and integrated with you, an estate planning attorney, and even a CPA. Therefore, this provides you with the opportunity to help your clients, and at the same time meet and network with many of the estate planning attorneys and CPAs in your area
- Ask for referrals. Once you have finalized, funded, and coordinated a sound estate plan, a client should be extremely pleased with the great things you have accomplished together. Having said that, this opens the door for a great chance to say something like, “Can you think of any co-workers, neighbors, friends, or family members that might also need to make these kinds of improvements? If not, keep me in mind if this conversation comes up in the future, because I’d love to help the people you care most about.”
Third, since 70 percent of people in America die without creating or leaving behind so much as a will, you need to start with the basics, and keep it very simple. Help them understand the basic concepts of how this works and why it is necessary.
I’ve put together a basic piece that you can use, which should help you get your clients started in the right direction. This can be used for both your existing clients, as well as to help generate new clients and referrals.
This piece is designed to address what I’ve found to be the four most common questions that people have when it comes to estate planning through the use of wills and trusts.
*Note: These are only some of the many questions that often arise on the subject of wills.
Of course, these laws can be very complicated. This is designed to present some of the simple and straightforward answers to commonly asked questions. Therefore, my suggestions is that you should only use this as an introductory guide to paving the way for creating an estate plan using wills or trusts.
The four most common questions regarding the basics of estate planning:
1. Why do I really need a will?
2. What will happen if I don’t have a will?
3. What is the best choice for me — a will or a trust?
4. How do I get started?
Common questions and practical answers
What is a will?
A will, also referred to as a “last will and testament,” is a signed document in which a person (often referred to as the “testator”) directs what is to be done with his or her property after death. Each state has its own very specific laws as to what is necessary for a will to be valid in that state.
Who can create a will?
Any mentally competent person who is at least 18 years old may make a will. However, later proof of any fraud, duress, or undue influence by another person or the testator may cause the will to be invalid.
Who should have a will, and why?
Every mentally competent adult should have a will. Here are a few of the reasons why:
Does a will need to be witnessed? Does a will need to be notarized?
- You can direct how you want your property divided at your death.
- You can name the person you want to handle you estate (called the “executor” or “personal representative”).
- You can reduce the expenses of administering your estate.
- You can save taxes.
- You can nominate a guardian for your minor children.
- You may provide for a trust for the support and education of your children without the necessity of costly court proceedings.
Generally, most states require that the signing of a will be witnessed by two competent persons, who also must sign the will in front of the testator. An exception to the witness requirement is made if the testator writes out the entire will in his or her own handwriting, and signs and dates it.
Although the law does not require a will to be notarized, it is a highly recommended practice, followed by most lawyers. If the testator’s and witnesses’ signatures have been notarized, the will is presumed to be properly executed and is accepted by the court without testimony from the witness.
How long is a will valid?
Your will is valid until you revoke it, generally either by physical destruction (tearing or burning it up, for example) or by signing a superseding will or written revocation. However, if you become divorced after signing a will, the law may consider the will partially revoked. Also, if you are married, your spouse may have rights in your estate, regardless of what is provided in your will.
Can a will be changed?
Your will does not take effect until you die; therefore, it can be changed at any time during your life, as long as you are mentally competent. Traditionally, wills were changed by an amending instrument called a “codicil,” but with the development of modern word processing technology, it is usually better and just as easy to sign an entirely new will when you wish to make changes.
What happens if you don’t have a will?
If you don’t have a Will, a state statute directs who receives your property, regardless of your wishes. For example, in my home state of Virginia, if you are married, your estate generally passes entirely to your surviving spouse; however, if you have children who are not also the children of your spouse, your children divide two-thirds of your estate, and your spouse takes the remaining third.
Is joint ownership a good substitute for a will?
In most cases, joint ownership is not an acceptable substitute for a will. Contrary to popular belief, joint ownership of assets between husband and wife often results in excessive estate takes. Joint ownership between parent and child may foster disputes between family members and cause unexpected and unnecessary gift taxes.
Is a trust (aka revocable living trust) a substitute for a will?
A properly funded revocable living trust can be a valuable and important part of the estate plan for many people, but it does not eliminate the need for a will. If you have a living trust, you will still need a will to dispose of those assets that have not or cannot be placed into the trust.
As useful as they are, living trusts are not appropriate for everyone. Only your lawyer can tell you if you should consider one, and only your lawyer should prepare it for you.
Who should draft your will?
A person who drafts a will must be familiar with the law in order to avoid the many pitfalls and to comply with the formalities necessary to assure the will’s validity. Only a practicing lawyer is professionally qualified to give you advice regarding your will, to prepare your will, and to supervise it’s signing.
Planning your financial affairs, and coordinating this with your estate plan, is a very personal and individual matter. You should decide for yourself the general purpose you wish to accomplish, and then consult with a seasoned estate planning attorney, financial advisor, and CPA if you want to have a coordinated and comprehensive plan which integrates and accomplishes all of your financial goals and objectives.
Four practical steps to save time and help assure a sound result
1. Inventory you assets. List, in reasonable detail, all of your property, real and personal, life insurance policies, and retirement plans, with your best assessment of their values.
2. Inventory your liabilities. List all debts and obligations, including principal amounts, payees, and essential terms.
3. List your family members and any other persons whom you wish to participate in your estate. Decide who might be an appropriate executor, trustee or guardian for your minor children.
4. Decide what you want to accomplish. Determine what your objectives are, and to whom you wish your assets distributed.
*Note: Financial advisors should place their information here. For example:
Christopher P. Hill, RFC®
Wealth and Income Group, LLC
Five easy steps to getting started
1. Spend some time with your existing financial advisor or an experienced financial advisor in your local area, so you can review the basic details of your big picture financial plan together.
2. Your financial advisor will review this information and help you confirm your estate planning needs and preferences.
3. Once your financial advisor reviews your overall estate planning needs, they can help you understand exactly how wills and trusts work, as well as which one they feel best fits your situation.|
4. After you are fully comfortable and confident with their recommendation, you can consult with a seasoned estate planning attorney who can help you properly draft these documents and details.
5. Arguably the most important step, and one that is often overlooked, is making sure that your estate planning attorney, financial advisor and CPA are all working together to ensure all of your estate plans and preferences are coordinated and working properly with your big picture financial plan.
If you have any questions or concerns, feel free to contact me for any reason.
*Note: I do not charge fees for any phone consultations or first meetings. Therefore, if you would like to have a phone conversation, set a time for us to meet and get to know each other, or if you simply need to contact me for a referral to an excellent estate planning attorney or CPA, please don’t hesitate to reach me at (XXX) XXX-XXXX, or e-mail me at firstname.lastname@example.org.
I truly hope every financial advisor who reads this is able to appreciate this fantastic opportunity to grow their practice. And since there is virtually no cost, it offers a win-win situation for everyone involved.
As a parting thought, think about this fact: If approximately 70 percent of people who die fail to leave their loved ones a simple will, that means there are lots of people and families out there who need our help. And although reviewing their estate plan, recommending a will or a trust, and referring them to a qualified estate attorney will sometimes create no financial benefits, the rewards will come back to you in more ways than you can imagine, and these rewards will extend far beyond any revenue you could ever receive.