Save your clients and their loved ones future financial headaches by talking about the details of estate planning sooner, rather than later.
Estate plans are vitally important components of a financial plan, says Reg Swamy, vice president with the Trust Business, a division of TD Waterhouse Canada Inc.’s Private Client Group in Toronto. But most clients either do not contemplate estate plans or put off dealing with them. “If estate plans don’t get dealt with when the client is still alive,” Swamy says, “the legacy that is left behind is very messy, very complicated and very contentious.”
The following steps will help you address estate-planning priorities with your clients:
1. Discuss the client’s goals
Get a complete picture of the client’s estate plan by talking about his or her legacy and objectives.
“[The] first point to figure out is: what are you trying to achieve with this [plan]?” says Jason Round, senior manager of financial planning support with RBC Financial Planning in Toronto. “Ask: ‘What are your objectives for the estate plan?'”
For example, look at the monetary assets the client plans to leave, he says, and the implications that may have for the beneficiaries.
2. Look at the whole picture
Talk to your clients about their entire financial situation when creating an estate plan.
Sometimes, advisors are too narrow in their focus when talking to clients about their estate plans, Round says. Instead of concentrating solely on the assets under your management, ask your clients about all assets, including bank accounts, insurance policies and real estate, as well as liabilities such as a mortgage.
3. Ask about the will
Find out if your client has a will. If he or she does have a will, ask how recently it was updated.
If your client does not already have a will, Swamy says, speak with him or her about what they need to do and what they should consider in order to create one.
If the client does have a will, he says, make sure it is up to date and reflects his or her current situation and wishes.
According to Swamy, TD’s research suggests that three out of four Canadians over the age of 50 do not have an updated will.
4. Review the will
Make sure the will can actually accomplish what the client wants.
Ask to see the relevant financial sections of the will, Swamy says, to ensure that the plans laid out will meet the client’s objectives for distributing the assets after his or her death.
5. Construct a plan
Write out a detailed process to ensure the client’s estate plan is executed correctly, Swamy says.
For example, the plan should outline how the investment assets should be distributed once the client passes away, he says. It should outline what will happen to real estate and physical assets, such as a boat, as well as how the estate will deal with any debt.
As well, don’t forget to talk about insurance needs, Swamy says, and any charitable donations the client wishes to make, either before or after his or her death.
This is the first of a two-part series on estate planning. Next: working with other professionals, beneficiaries and powers of attorney.
IE