While estate planning is a topic of growing importance for aging boomers, younger people — in their 20s and early 30s— are probably not thinking about what would happen to their assets in the event of illness or death.
“Most people spend more time getting haircuts than thinking about dying or estate planning,” says Mark Halpern, trust and estate practitioner, certified financial planner and president of illnessPROTECTION.com Inc. in Markham, Ont.
However, estate planning is a topic you should be discussing with clients who are 18 or older and have assets of any kind. While it may be difficult to broach that subject, Halpern offers the following tips for starting the conversation:
> Make it relatable
“The lowest hanging fruit,” Halpern says, “is for [young people] to connect to the fact that it can happen.”
Ask your client if he or she has any family members or friends who have become ill or died suddenly. You can use examples from the entertainment or professional-sports community to support the idea that young people are not invincible and that planning for the worst-case scenario is a smart move.
> Ask if your client would want the government to choose beneficiaries
Halpern says there are three possible beneficiaries to an estate: the client’s family, the government and charity.
Ask your client, “If you could pick only two of those beneficiaries, which would you want to choose?”
Let’s say you have a young client with a spouse and one child. In Ontario, for example, if your client dies without a will, the provincial government would use this formula to determine how your client’s assets will be split: the first $200,000 of your client’s estate would go to the spouse and the balance is divided between the spouse and the child.
However, the child’s share would be held by a public trustee and invested in fixed-income investments. Your client’s child would not be able to access that money until he or she turns 18.
Says Halpern: “Most people would not want that.”
> Use your client’s parents as an example
If you also advise your young client’s parents, it will be easier to persuade him or her to have this conversation, especially if the parents have an estate plan of their own.
“If clients have a good relationship with their parents,” Halpern says, “the parents are good influencers.”
The parents having an estate plan is both a good example for the young client and a financial necessity. The parents would probably be passing all or some of their estate to their children.
The young client, in turn would want to continue planning with an advisor to ensure that the estate transfer is smooth and tax-efficient when his or her parents die — and when the young client dies.