Getting Clients Ready to Get Serious About Estate Planning - Part Two

Six steps toward successful estate planning (second in a series)

By Valentino Sabuco, CFP®, AEP®

Key Takeaways:

  • Estate planning should address the way clients hold title to various assets, beneficiary selections and the possible transfer of certain assets while they are alive.
  • Estate planning is a lifelong process, not a onetime exercise.

READER NOTE: The third week in October is National Estate Planning Awareness Week. Visit www.thefinancialawarenessfoundation.org for more about important financial awareness campaigns and how you can use these initiatives to build your practice.

In Part One of this article series, we explored the legal, emotional and financial consequences of not having an up-to-date estate plan and three key steps for getting clients onboard with the process. Here we’ll look at the impact on estate planning of the new American Taxpayer Relief Act so you can develop strategies, implement the plans we laid out in Part One and track and monitor your progress against those plans.

As most advisors remember, President Obama signed the American Taxpayer Relief Act (ATRA) into law on January 2nd of this year. Many of the temporary provisions from prior tax acts were made permanent, ending much confusion and speculation.

  • Federal Estate, Gift and GST Taxes—The estate tax, gift tax and generation-skipping tax exclusion amounts are all set at $5 million and indexed for inflation after 2011. For 2013 the exemption amount is $5.25 million. The top estate, gift, and GST tax rate is increased from 35 percent to 40 percent.
  • Portability—for taxpayers dying after December 31, 2010, the estate tax exclusion is “portable” between spouses. This means that the surviving spouse’s exemption is increased by any exemption not used at the first spouse’s death. However, this is not automatic; it must elected by timely filing a 706 estate tax return.

4. Develop strategies. With your assistance and that of the client’s attorney and other estate planning advisor(s), identify the legal documents that need drafting or make any necessary adjustments to existing documents. Determine any other actions that must be taken for the client’s wishes to be carried out.

5. Implement the plan. Do what needs to be done—i.e., create new wills, trusts, advance health care directives, and powers of attorney; adjust titles to properties; and change alternate beneficiaries of retirement plans and life insurance policies as appropriate.

6. Track and monitor the progress. Discuss your client’s estate plans annually or any time there are changes in family situations or net worth. Also consider developing a client’s financial planning calendar to schedule the next estate planning review.

Common estate planning mistakes to avoid
  • Lack of planning
  • Disorganized finances
  • Not having a will, trusts, powers of attorney for property management, and an advance health care directive
  • Having out-of-date estate plan documents
  • Not selecting backup executors, trustees or guardians
  • Not coordinating life insurance and retirement plan beneficiaries with the estate plan
  • Not coordinating life insurance ownership with the estate plan
  • Not coordinating property title holdings with the estate plan
  • Not having enough liability and life insurance
  • Failing to complete a location sheet to tell the executor, trustee or attorney where the primary financial information is kept
  • Procrastination

It is estimated that more than 120 million Americans do not have an up-to-date estate plan to protect themselves and their families, making estate planning one of the most overlooked areas of personal financial management. Assisting your clients and their various family members to get and keep their estate and financial plans current is an excellent ongoing business opportunity and client service.

About the Author

Valentino Sabuco, CFP®, AEP®, is the executive director and publisher of The Financial Awareness Foundation, a 501(c)(3) nonprofit located in Sonoma County California. Valentino has pioneered the financial planning profession for over 40 years. TFAF serves as a nonpolitical and neutral “financial awareness advocate” for the public, the professionals and their associations, educational institutions, and nonprofits. Our mission is to significantly help solve a major social problem by dealing with the lack of financial awareness and financial literacy. We believe teaching financial literacy is very important as it gives people the essential tools to address everyday financial decisions in a more informed manner. Valentino can be reached at V.Sabuco@TheFinancialAwarenessFoundation.org or (707) 586-8620.