This week our focus on the Blog involves financial planning and the essential role your financial advisor plays in preparing you for retirement. But for this article we’re attempting to answer the question, what good things can happen when a retiree’s financial planner and estate planning attorney actually collaborate? Doesn’t it make sense to have these two key people work together on your behalf?
If you’ve listened to Rajiv Nagaich on the radio or attended one of his highly-popular retirement workshops, you’ve probably heard him decry the way retirement planning in America is too often done. It’s typically a disjointed process in which we hire a financial expert, an attorney, a medical provider, and even a real estate broker – none of whom talk to the others. Not only is our so-called “retirement plan” a patchwork of disjointed elements, but our family members are often left out of the conversation entirely!
To see what could happen if estate planning attorneys and financial advisors actually collaborated for the benefit of their clients, we uncovered two professional articles on the topic, one from a blog for financial advisors and the other from a financial advisory firm based in Little Rock. Together they offer what appears to be a helpful and healthy perspective.
Financial Advisors Play a Valuable Strategic Role in Estate Planning
Our first look at the ideal partnership between financial advisors and estate planning attorneys comes from a blog for financial advisors called Kitces. The writer of this popular blog explains that there is a natural and symbiotic relationship between these two professional groups.
“Financial advisors can play a valuable role in the strategy, implementation, and funding stages of the estate planning process,” says Kitces. When advisors and attorneys collaborate, the writer goes on, financial advisors “can add significant value for their clients throughout the estate planning process, from evaluating their current plan to helping them find a qualified estate planning attorney, to working with the attorney to ensure the new or updated plan meets their client’s goals and is executed and funded appropriately.”
Does the Client Have an Estate Plan – and Is It Sufficient?
The Kitces blog article notes that the financial advisor may very likely be in a better position than any other professional to discover if their client has an estate plan at all.
“Advisors can start by identifying whether a client even has an estate plan in the first place,” says the blog, “and, if so, what the current plan entails.” Working with the client, the financial advisor can then do a deeper dive to see if the plan meets the client’s long-range goals.
Then, a referral to an attorney can follow. “If needed,” says Kitces, the advisor can “encourage the client to engage with an estate planning attorney who can recommend potential solutions (ideally in consultation with the advisor, who will be intimately familiar with the client’s financial situation and goals) and draft the legal documents necessary to execute them.”
Financial Advisor Can Assist with Implementation and Funding of the Plan
The best estate plan in the world is useless unless properly implemented and funded, and here the financial advisor can play a crucial role. This starts in the so-called implementation phase, when the client’s estate plan is just taking shape.
As planning begins, says the blog, “financial advisors can review the estate planning documents to ensure they are appropriate to meet their client’s needs and confirm that the client actually executes the documents.” That way the plan is more likely to mesh with the client’s stated goals as the financial advisor understands them to be.
Later, in the final phase – funding of the plan – “advisors can provide value by ensuring that accounts are retitled as necessary so that the client’s assets are appropriately positioned to meet the goals of their newly crafted estate plan,” says Kitces.
The end result of this collaboration between financial advisors and estate planning attorneys is better client service. The Kitces article adds that this type of partnership “sets the table for a strong relationship with their client’s heirs when the client’s assets are distributed at their death, continuing the legacy of providing valuable financial planning to family members when they may need it most!”
A ”Crucial Partnership” Between Financial Advisors and Estate Planning Attorneys
For our second source, we discovered this article on the website of a firm called Sowell Management based in Little Rock, Arkansas. It was written by estate planning attorney Ledley Jennings. Jennings is a big proponent of greater collaboration and cooperation between estate planning attorneys and their professional counterparts in the world of financial planning.
“In the intricate world of financial planning,” Jennings writes, “collaborating with professionals from various fields is essential to provide clients with comprehensive and tailored solutions. One crucial partnership that every financial advisor should consider is working with an estate planning attorney.”
As Jennings writes, this professional collaboration provides significant benefit to clients and enhances their financial well-being and legacy. He then goes on in his essay to list what he calls “five compelling reasons” why this attorney/advisor partnership is “essential.” He also cites what he calls the “key documents” related to each of his five reasons.
Let’s take a look.
Pros Work Together to Streamline Asset Distribution, Avoid Probate
Key Document: Revocable Living Trust
Financial advisors are often the professionals who create the asset distribution tools suggested by estate planning attorneys. These folks need to work together, says Jennings.
“The establishment of a revocable living trust is a powerful tool for seamless asset distribution and avoiding the often lengthy and expensive probate process,” Jennings writes. This is a key area where financial advisors can provide professional support.
“Financial advisors, in conjunction with estate planning attorneys, can guide clients in setting up a legally binding document that outlines the distribution of assets according to their wishes,” Jennings adds. “This not only ensures a smoother transition of assets but also provides privacy and potentially reduces estate taxes.”
Financial Advisors Help Empower Clients with Decision-Making Authority
Key Documents: Power of Attorney (POA), Healthcare Proxy, Living Will
“Designating someone to make financial, legal, and healthcare decisions in case of incapacity is crucial,” Jennings states. Moreover, even though these are legal documents, an involved financial advisor plays a key role in encouraging clients to engage in the planning process.
“Financial advisors should emphasize the importance of having a comprehensive set of documents,” Jennings urges, “including a Power of Attorney (POA), Healthcare Proxy, and Living Will. These documents empower trusted individuals to act on behalf of the client, ensuring their wishes are respected and financial matters are handled appropriately.”
Advisor/Attorney Partnership Helps Create a Plan for Specific Client Needs
Key Documents: Various trusts, Medicaid Asset Protection Trust
Creating individualized estate plans is something estate planning attorneys specialize in. It’s also an area where financial advisors can and should engage.
“Advisors can work collaboratively with estate planning attorneys to ensure the inclusion of [key] documents in the overall financial plan,” says Jennings, “addressing the unique challenges and considerations that come with aging.”
Elderly clients, for example, may need additional documents such as an Advanced Healthcare Directive and Medicaid Asset Protection Trust. By being aware of needs like this, financial advisors can better serve their clients’ interests.
Financial Advisors and Estate Planning Attorneys Help Protect Business Interests
Key Documents: Operating Agreement, Business Succession Plan, Buy-Sell Agreement, Key Person Insurance
“Business owners face unique challenges that require specialized legal instruments,” Jennings observes. “Financial advisors working in tandem with estate planning attorneys can ensure that business owners have the necessary protections in place.”
As examples, Jennings cites tasks such as establishing an operating agreement for proper protection of an LLC, or devising a business succession plan. A client who is a business owner may need assistance implementing a buy-sell agreement or establishing adequate insurance safeguards to protect the business against the loss of critical employee or business owner.
These, Jennings suggests, are areas where a financial advisor and an estate planning attorney can clearly work in tandem.
A Healthy Professional Collaboration Ensures Comprehensive Family Protection
Key Documents: Guardianship Designation, Trusts, Letter of Instruction
It’s not only the client who benefits when advisors and attorneys work together. Families and heirs do as well.
“Families with children require a comprehensive approach to estate planning,” Jennings writes. “Advisors, collaborating with estate planning attorneys, can guide clients in designating guardianship for minor children, establishing trusts for their financial security, and creating a letter of instruction to provide guidance on the care, values, and education of the children.”
This level of partnership helps guarantee that the family’s needs will be met in the event of unforeseen circumstances.
Holistic Planning Requires Cooperation Across Professional Lines
We agree with Jennings’ conclusion. “The collaboration between financial advisors and estate planning attorneys is invaluable for creating holistic financial plans that address clients’ diverse needs,” he writes. “By working together, these professionals can navigate the complex landscape of legal and financial considerations, ultimately providing clients with peace of mind and a well-protected legacy.”
He adds, “Financial advisors should actively encourage their clients to engage with estate planning attorneys to ensure a comprehensive and tailored approach to their financial future.”
Rajiv Nagaich – Your Retirement Planning Coach and Guide
The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.
You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.
Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.
Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.
Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone!
(from multiple sources)