With the recent turmoil in the financial markets, you have undoubtedly been spending a great deal of time managing and calming your clients’ expectations and fears regarding their portfolios and financial future. As coverage of the COVID-19 pandemic continues to saturate the media, you may have also noted a significant rise in clients’ anxiety levels about estate planning and their own mortality.
In addition to the barrage of “doomsday” prognostications, clients are also struggling to get their arms around the recent SECURE Act and how it will affect their retirement and estate planning. Adding further fuel to the fire, research indicates:
- 60% of U.S. adults do not have a will
- 70% of U.S. adults do not have an estate plan
- 40% of affluent investors rate having no estate plan as their biggest concern
Keeping in mind financial advisors are typically not able to provide legal advice, it is critical that you have a referral association with a local estate planning firm that understands and respects your role in the client’s trusted circle of service providers. Additionally, you should strive to be included in any estate planning conversations as to your ongoing role with the client and their family.
As your client’s preferred investment advisor, it is essential that you are prepared to address many of these recently escalating concerns that often range far beyond managing portfolio risk and asset allocation.
One often overlooked topic you should be comfortable discussing is medical decision documents. These include:
- Healthcare directive – What healthcare measures do you want if you become incapacitated?
- Healthcare durable power of attorney – Who do you want to make decisions if you are incapacitated?
- HIPAA authorization – Allows healthcare providers to share information with your decision makers
Over 1/3 of U.S. adults do not have a healthcare directive. Regardless of marital status, these are all very important documents for any client over the age of 18.
As an essential part of a basic estate plan, clients may also have questions and concerns regarding trusts and wills. Again, although providing specific legal advice is not recommended, here are several important topics you can offer insight on:
- Benefits of a revocable/living trust
- Avoiding probate with efficient distribution of assets
- Reducing estate and gift taxes
- Caring for minor children or protecting assets from children’s spouses
- Caring for special needs beneficiaries
- Preserving assets for future generations
- Differences between personal representative (PR aka executor) and a trustee
- PR is named in the will to manage the probate process
- Cannot exercise power until obtaining a court order
- Values estate and transfers assets to trusts and beneficiaries
- Files tax documents to close the estate (Form 706 and 709)
- Trustee is appointed in the trust document
- Legal owner of all assets titled in the name of the trust
- Interprets and executes the grantor’s wishes
- Acts with reasonable care in the beneficiaries’ best interest
- Responsible for managing the assets in the trust unless directed
- Differences between an individual versus institution as successor trustee
- Individual as successor trustee
- Understands family dynamics
- Less expensive and more suitable for smaller trusts under $250,000
- May have expertise/experience needed for family LLC’s or business holdings
- Institution as successor trustee
- Comprehensive experience and expertise
- Unbiased with no family agendas
- Continuity of service — doesn’t die, get sick, or go on vacation
- May allow for grantor’s preferred advisor to manage trust assets
Each of these topics can open the door to a more substantive dialogue with your client. Here are several follow-on discussion points that can assist in demonstrating your ability and desire to remain an integral part of your client’s trusted inner circle of service providers.
- Are your clients planning on leaving assets in trust to their heirs? Why or why not?
- Are they interested in having you continue to manage the trust assets up their death or incapacitation?
- How might a relative or traditional bank/trust company as successor trustee cut you out?
- Are your clients aware of the advisor-friendly trust model that will allow you to handle the asset and relationship management in conjunction with an institutional trust company as trustee?
- Is your client interested in suggested trust language that will name you as their preferred advisor upon their incapacitation or death?
These are clearly unsettling and unpredictable times. More than ever, your clients need your support and guidance across these broader array of issues. Whether it be reactively in responding to client’s calls and emails, or proactively, in outreach to your clients, if you aren’t doing it, somebody else may be.
© BOKF, N.A. Member FDIC. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE The content in this presentation is for informational and educational purposes only and does not constitute legal, tax, or investment advice. Always consult with a qualified financial professional, accountant or lawyer for legal, tax, and investment advice. Neither BOK Financial Corporation nor its affiliates offer legal advice.
. © 2024 BOKF, NA.