How Uncovering Your Clients’ Legal Needs Means More Business for You

Estate plans, like complex computer code, can get buggy. As a financial advisor, you have a fiduciary duty to your clients to help them avoid negative consequences of bad planning. That duty includes keeping tabs on legal issues related to estate planning and getting your clients the help they need, when they need it, and no later.

Being able to spot common problems with estate plans can do a lot for your business. It can expand your relationships with clients and allow you to serve them in a fuller capacity – one that’s more profitable for you.

That said, you probably have more than enough on your plate already. The thought of getting into the weeds into estate planning and probate law may be overwhelming. And it is true that the rabbit hole goes deep. Subjects such as planning to avoid probate, developing workarounds for clients to limit business and estate taxes, and canvassing potential financial instruments to recommend for various situations can make your head spin.

Fortunately, you do not need a law degree or years (or even hours) of study to spot some very common gaps in plans!

Below we’ve catalogued 8 strategies to gauge your clients’ risks. Like gauges on your car’s dashboard, when you see these signs “light up,” it might be time to rope an experienced estate planning attorney into the mix to figure out what’s happening and what needs to be done to clean things up.

8 Easy to Spot Estate Planning Issues – Signs You and Your Client May Need to Call in the Cavalry

Pull out your client and prospect lists, review account titles and documents, and look for these blatant signs that an estate plan might fail:

A will-based estate plan or no estate plan: Wills can be good estate planning tools if used correctly. But they very often aren't! A proper estate plan should include the goal of avoiding probate. If your client dies intestate, fairly or not, that will reflect poorly upon all of his or her financial advisors and possibly lead to lots of headaches (and maybe even unpaid work) in your future. Likewise, if a will isn't written properly; if it attempts to include property held in joint tenancy; or if it designates a beneficiary that conflicts with beneficiaries named on other legal documents, your client's goals are not adequately expressed. They might even be setting up their heirs for a long and expensive probate court proceeding. Don't let that happen. Step in, be a hero, and take the initiative to get this gap filled.
An unfunded revocable living trust: Unfunded trusts can lead to as many problems as a poorly written will. Some assets will require more legal footwork to handle properly during the estate planning process. These include real estate, intellectual property, certain types of stock, business partnerships, and promissory notes. But, building a solid foundation through proper funding is very important if the plan is to work as intended when it’s needed.
Exposed assets: Assets held as joint property can pose problems if the surviving spouse has a lot of debt. Protect your client's by ensuring their assets are titled correctly and insured properly. Otherwise, the estate could be held up in court, as debtors seek to get their claws on those assets. Again, if you spot a red flag, bring it up with your client, so you can both start to address it.
Assets left outright to beneficiaries: Likewise, an estate plan that provides for outright distributions to beneficiaries leaves that inheritance unprotected from creditors, predators, divorcing spouses and lawsuits, outside influences, and lack of investment experience…. not to mention an inheritor's own bad decisions. There is a better way. An experienced estate planning lawyer can help you rifle through possible planning instruments and strategies to find the perfect match and solve the problem for your clients.
Family members as successor trustees: One problem with naming family members as successor trustees is that many people name two or more co-trustees. If the family members do not get along; if they don't trust each other; or if they disagree with each other's decisions, they could end up fighting about it in court. In that case, all the inheritors will be waiting for their inheritance, possibly for years. This can be avoided by naming an institution, such as a bank or trust company, as the primary trustee and the family members as co-trustees. The primary trustee can mediate disagreements that arise, saving the family time and money in the process. In our experience, family strife is often a significant cause of estate planning failure after the trustmaker dies.
Outdated beneficiary designations: Even if a client or prospect has recently updated their estate plan, one common oversight is revising beneficiary designations for their annuities, 401(k)s, IRAs, or life insurance to coordinate with the new plan. It is also possible that a beneficiary designation has not been changed since the account was initially opened. Check the beneficiary designations for accounts you know have been around for a long time – chances are, there are some forms that need updating.
Too much or not enough life insurance: The federal estate tax exemption continues to increase each year, and it is approaching nearly $5.5 million per person. Many older people might now be over insured. Policies with high cash values can be tapped to provide cash flow or terminated in favor of other investments, adding assets to your management or providing you with an opportunity for the placement of more appropriate financial products. Alternatively, many younger clients and prospects may be under insured, leaving their loved ones vulnerable to lost wages and unmanageable debt.
Lack of long-term care planning: While many people plan for what happens after they die, a surprising number fail to plan for extended illness or deteriorating mental capacity. Emphasize to your clients that they need some form of long-term care arrangement and that such a plan needs to be funded somehow.

Key Takeaways:

By identifying common gaps in your clients' estate plans, you can be of much greater service to them and protect them from undesireable outcomes they may not even see coming.
Fortunately, you do not need to do a deep dive into estate planning law to spot the glaring red flags that I’ve shared with you in this issue.
Spotting these red flags can serve as a springboard for you, leading to deeper conversations with clients about their future and possibly bringing you more business with them.

Call Us, We’re Here to Help

Don’t worry about actually fixing all of the problems you uncover – that’s where we can help. Call us, and we'll answer your questions, review client documents, and explain the available options to avoid the pitfalls. We’d also be happy to strategize with you to figure out a process for identifying the most promising areas for helping your clients and generating new business.