How to help clients start a travel fund
We’ll discuss the ways you can help your clients financially plan for travel, like how to save for and book a cost-effective trip.
Let’s face it, estate planning is a topic that many clients aren’t exactly eager to address. Some don’t fully understand what estate planning is or understand why estate planning is important. One way to help clients understand the value of proper estate planning is to consider what can happen without a plan.
When we talk about estate planning, we’re referring to the basic elements of a will and possibly trusts. Legacy planning, as we’ve previously discussed, is a broader topic and includes things like retirement accounts, life insurance, and jointly owned property. These are considered non-probate assets as they will generally pass through a beneficiary designation or, in the case of jointly owned assets, by operation of law. Here we’ll consider basic estate planning.
The first question some clients will have is, what if I die without a will? Is that a big deal? Well, it can be. Dying without a will is commonly referred to as intestacy. When this occurs, anything included in your probate estate, such as your personal property or financial accounts that aren’t jointly owned or don’t have a beneficiary designation, will be allocated pursuant to your state’s intestacy statute. Intestacy statutes vary from state to state, but they tend to proscribe rigid distribution rules dictating who gets what. In general, spouses get priority, followed by children. Friends, unmarried partners, stepchildren, and other individuals may get nothing. If no relatives can be located, your property may even end up going to the state.
Another potential downside to dying without a will is that the probate court will have to appoint a personal representative to settle your estate. In most states, any interested person can petition the court to be appointed as a personal representative. The risk is that the court will appoint someone other than the person you would have chosen.
A will gives you the power to name your own executor. This means you can name the right person. In general, it can be helpful if you have someone who is emotionally grounded in this role. I can tell you from experience that a death in the family doesn’t always bring out the best in people. Having an executor who can calmly manage the conflict that will inevitably arise in a difficult time can be a big help to surviving family.
For younger clients, a will can also address one of their biggest concerns- who will end up raising their children? A will can be used to formally name a guardian for minor children in the event both parents were to die. While this is unlikely to ever be needed, it can still bring peace of mind and avoid a potentially contentious situation of having to determine an appropriate guardian after the fact.
Dying without an estate plan can also create problems for vulnerable beneficiaries. Many clients will have beneficiaries who are simply not equipped to suddenly start managing an inheritance. They may be minors. They may have behavioral issues that would make it risky for them to suddenly have access to a large amount of money. They may have special needs.
In these situations, having a trust can offer a level of protection as these beneficiaries inherit their share of assets. Through a trust, a client can name a trustee to manage inherited assets and distribute them to the beneficiary in a controlled manner. In the case of an irresponsible beneficiary, this can prevent them from squandering money. In the case of someone with special needs, this can allow a trustee to help a beneficiary without jeopardizing their access to important means-tested governmental benefits. By contrast, an unplanned inheritance can lead to a host of unintended consequences.
Trust planning can also help clients avoid or minimize the probate process. Probate is a court-supervised distribution of assets. Probating a large estate can be expensive and take months to complete. It’s also a public process, which many clients may not be comfortable with. Putting a trust in place can both maintain privacy and potentially give beneficiaries much quicker access to their inheritance.
As a financial professional, you can help your clients by simply explaining what could happen if they don’t take the time to plan. For most people, simply contemplating the possible results will be a powerful motivator. If you know an attorney that you feel confident referring them to, that can also be a good step. Some clients may decide to take advantage of the growing number of online options available for basic estate planning. Either way, the most important thing is that they do something and put a basic plan in place. Failing to do so can cause unnecessary hardship, not only for their families but for your practice as well.
This information is general in nature and is not intended to be tax, legal or other professional advice. Federal income tax laws are complex and subject to change. The information presented here is based on current interpretations of the law and is not guaranteed.
Nationwide and its representatives do not give legal or tax advice. An attorney or tax advisor should be consulted for answers to specific questions.