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In Estate Planning, Encourage Clients to Be Open With Adult Children

It was the morning I was to return to Denver after a weekend trip to my small Southern Colorado hometown. My mom and I were having coffee when she said, “Anita, we have to discuss some things.” She got up from the table and went over to a filing cabinet and pulled out a manila folder full of papers.

I realized what the papers were as soon as she’d sat back down. Apparently, she’d devoured the book I’d given her called The Other Talk A Guide to Talking to Your Adult Children About the Rest of Your Life.

My mom is a miracle worker with money. And as she laid out each piece of paper and explained what it was, I realized she’s managed to conduct another miracle—planning the entirety of her and my dad’s estate planning without having us do or pay for it. She’s planned out every detail of her funeral down to what seems like a party complete with a playlist. She’s written instructions as to what we are NOT to do (none of that darn crying, no obituary in the paper, etc.) and she’s even paid for it all already.

Of course, I’ll have to disobey her instructions when that time comes. I couldn’t even hold in my tears as she was explaining what was what because the thought of a world without my queen, my hero, my best friend is unbearable. But she has a way of discussing death as though it will be her last business transaction—one that she’s already put in the work for—and one that I should definitely not live in denial about.

“This is where everything is so you know when the time comes,” she explained as she put the folder neatly back in its drawer.

In editing this month’s Journal of Financial Planning—which is all about estate planning—I got to thinking about this talk with my mom and how it would be helpful if all parents would be this transparent with their kids.

So, I did some research and compiled a list of what you could do to help your clients be as open and honest with their kids as my mom was with me.

Encourage them to have the family talk. The talk I reference above wasn’t the first time my mom has sat me down to discuss this topic. I am the youngest of four children, and she’s sat all four of us down in the same manner to discuss her and my dad’s end-of-life documents and planning. On numerous occasions, she has brought the four of us together to talk about the properties and insurance policies and what will belong to whom and given us each the relevant documents.

Maybe your clients aren’t as open with their kids, but they can still sit down with their children to discuss their wishes and their end-of-life plan so that their kids can get on board. They can also discuss the financial and medical power of attorney appointment at this meeting.

Encourage them to be open with their kids about their decisions. Our mom has told us the rationale behind her estate planning decisions so we understand why certain assets will be given to certain siblings. We are all in agreement with these choices. My mom’s openness and honesty has made it easy for us to accept and honor her decisions. Plus, since she’s incredibly brilliant, her reasons for making each decision are sound.

Encourage clients to make a binder for each child. I got this idea from Bob Mauterstock at an FPA Annual Conference session he had in Boston. He encouraged the attendees to have their clients put together binders for each of their adult children so they can have all the relevant documents they need. My mom absolutely loved this idea and has also made binders for each one of us that contains all the documents relevant to whatever assets she has plans to leave us.

The emotional aspect of estate planning isn’t easy, but knowing my mom has done all of this and has kept us in the loop will make this incredibly difficult transition—both emotionally and financially—a little less intense.

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Ana Trujillo Limón is associate editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org. Follow her on Twitter at @AnaT_Edits.

 


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Financial Planning Priorities for New Parents

Everyone in my life is having kids. And, as the fee-only financial planner in my community, I’ve frequently been asked: “How do I set up a 529 college savings account?”

It’s a good question. But, as another adviser used to say, “it’s the wrong question.” While opening a 529 college savings account is usually a good idea, it’s very low on the list of financial planning priorities. Why ins’t a 529 college savings account a big deal?

Without a 529, attending college is still possible via either student loans and/or work-study programs. Moreover, there is even the chance that higher education might be free in the future, or that your client’s child determines that college isn’t right for them. Either way, not having a 529 doesn’t mean a catastrophic life event for you client.

I’m not saying don’t create a 529 account. I’m just saying that a client’s attention, energy and time are extremely limited—especially if they’re a new parent. So, if a client only has so much time in his/her hectic schedule, focus on the financial planning moves that will make the biggest impact.

What Planners Need to Emphasize for New Parents
A Will. While having a conversation with a client about their own mortality may not be easy, our profession knows that this subject is very important. Parents of minor children definitely need a will. In the will, it is critical to designate the names of the godparents in the instance that both clients pass simultaneously in an untimely manner.

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To illustrate the importance of a will, consider a worst-case scenario: Without a 529 account, a client’s child may have to resort to student loans to finance his/her education. Without a will, a client’s child may end up in a state-run orphanage. Of those two scenarios, which single issue is most dramatic—and which issue should receive the highest priority in terms of prevention as you advise new-parent clients?

Life insurance. You likely don’t need me to convince you that life insurance is important for new parents. The point here is that term-life insurance is infinitely more important than funding a 529 college savings plan. Household breadwinners need to designate their spouse as primary beneficiary with godparents (outlined in the will) designated as the contingent beneficiary.

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Illustrating a worse-case scenario to your client is the best way to effectively communicate the value of prioritizing life insurance over college funding: it’s more important that a client’s child has food on the table, clothes on his/her back and shelter over his/her head for ages up to approximately 18, rather than money for college.

Disability Insurance. In the context of financial planning moves for new parents, a disability insurance policy plays a pretty similar role as life insurance: providing money to fund a child’s lifestyle when your client (the parent) is no longer able to do so. For this reason, it’s much more important than a 529 plan, with a disability insurance policy providing money for food, clothes and shelter.

Prioritize Financial Planning Needs for New Clients

So, while having a college savings account is certainly a “nice-to-have,” it’s not a make-or-break financial planning move. A 529 college savings account is simply not that important. What is very important for parents (or prospective parents) are a will, life insurance and disability insurance. Address those three items FIRST, and then work with clients to open up a 529 college savings account.

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Jon Luskin
Fee-only Financial Planner and Fiduciary
Define Financial
San Diego, Calif.

Editor’s note: Find more of Luskin’s blogs about personal financial planning for employees of Deloitte at UncleDmoney.com.


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7 Do’s and Don’ts of Collaborating with Estate Planning Attorneys

Financial planners are uniquely suited to be the quarterback of the estate planning process and can motivate clients to do estate planning with an attorney. But planners must be careful to understand that they are not the experts in estate planning and should normally defer to the expertise of the estate planning attorney.

As an estate planning attorney who works mostly with financial planners with their clients, I have spoken on the topic of successfully working with estate attorneys to financial advisers, I teach estate planning to people who want to be CFP® professionals, have been the president of an FPA chapter and have been involved in the financial planning community for more than 25 years.

In the past I have been approached by financial planners who want me to draft estate planning documents at their direction, without allowing me to meet or talk to the client.  I have always refused this relationship because they are not collaborations or allowing me to do what is best for the client, but instead the financial planner is treating the estate planning lawyer like a mechanic and is not respecting the a lawyer’s knowledge and experience.

I am also sometimes faced with financial planners who ask me almost immediately what the fee is going to be, as if what I do is not as important as what they do, or that if they are involved in the process, it makes it easier so I should charge less. My typical response is to ask them if they would charge less if I referred a client to them or was involved in the financial planning or investment management process, and that answer is always, “No.”

So, here is my advice to successfully work with good and experienced estate planning attorneys:

1) Do not expect, or even ask, for the estate planning attorney to refer a client to you. Most really good estate planning attorneys get most of their clients from advisers and do not have the ability to refer clients. However, an estate planning attorney who understands and respects the financial planning process should, over time, be able to refer significant financial planning and investment management business to financial planners. In the last year, I have given referrals of clients to financial planners who collectively have about $50 million in assets. Those referrals go to those financial planners with whom I have worked, have met their clients, understand how they work and who respect what I have to bring to the relationship.

2) Do not negotiate a lower fee for your client. It is acceptable to talk fees and fee ranges, but do not say to the estate planning attorney that he should charge less to your clients for any reason.

3) Do come to any meeting you want with the client and the estate planning attorney. Do not work with an estate planning attorney who tells you that you can’t do this

4) If you or your client wants, review the estate planning documents before signing. Have an open and frank discussion with the attorney without the client present about any problems or questions. Do not work with an estate planning attorney who doesn’t want to send you drafts (obviously the client has to agree) or who just discounts any of your comments.

5) Do be the person who drives the implementation of the estate plan. If you do this, you will become more in control of the client, will probably get more work from the client and his friends, and be in the position to do the right thing. So, I rely on the financial planner to help the client re-title assets, change beneficiary designations, etc.

6) Do monitor any estate planning technique to make sure everyone is following the economics. Be in control of the process, the implementation and the follow-up.

7) Do motivate clients to meet with the estate planning attorney. Encourage them to meet with the estate planning attorney initially and when changes are needed.

There are many great estate planning attorneys out there. Financial planners must respect what an estate planner does and the estate planner must respect what a financial planner does. If you are referring your clients to someone who does not respect what you do or how you do it, then find someone else. If the estate planning attorney does not allow you to be part of the process, find someone else.

GaryAltmanThumbGary Altman
Principal Attorney
Altman & Associates
Rockville, Maryland

 

Editor’s Note: This post originally appeared in our Financial Planning Association’s FPA Connect community as a response to a query about the processes for working with estate attorneys. To contribute to the conversation, visit FPA Connect

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