Why You Need a Financial Advisor for Estate Planning

Financial advisors are very valuable to help you invest and manage your money and retirement plans. But financial advisors play another essential role: making your estate plan work.

You Need an Estate Plan

Smart and disciplined investing won't help your family if you don't have an estate plan that you regularly review and update. Estate planning is the foundation of your investment planning and family security. You need a competent and trustworthy estate planning firm to counsel you and prepare your estate plan. But you also need a competent and trustworthy financial advisor to make your estate plan work.

Your Probate Assets Must Be Transferred to Your Living Trust

Once you sign your living trust estate plan, you need to transfer your probate assets to it.

Probate assets include real property.  This includes your home, and any rental properties. As part of our estate planning work, we prepare and record grant deeds which transfer our clients real property to their living trust.

Probate assets also include investment accounts. The California probate threshold is $184,500. If your investment accounts are, in total, more that this amount, your accounts may be subject to probate. To avoid probate, you need to transfer ownership of your investment accounts to your living trust. The easiest and most reliable way to do this is to have your financial advisor do it for you. And if you don't have a financial advisor, now may be the time to get one.

Retirement Plan Beneficiaries

As part of your estate planning, you also need to confirm you have correctly named the primary and contingent beneficiaries for your retirement plans. Your financial advisors can help you do this correctly. 

Annual Reviews with Your Financial Advisor

And during your annual reviews with your financial advisor, you can confirm that your investment accounts are titled in your living trust and that you have correctly named both primary and contingent beneficiaries for your retirement plans.

Estate Planning Can Fail With No Financial Advisor

A big part of our estate planning law practice is trust administration - helping the trustee administer the trust when the trust owner dies. We've had many cases over the years where the trust administration became very difficult and complicated because the trust owner did not have a financial advisor. And conversely, most of our trust administration cases go very smoothly when the trust owner had a financial advisor.

Here are some examples.

Account Not in Living Trust - Probate?

Example 1: The trust owner had a DIY account with Vanguard or E-Trade and had failed to transfer ownership of his account to his living trust. The trustee had to navigate the labyrinth of dealing with the big corporate financial institution directly, without help from a financial advisor: calling and being put on hold forever, completing confusing forms and dealing with corporate representatives who did not understand California probate rules. And often, it would require a Heggstad petition or a probate for the trustee to get access to the accounts.

All this would have been avoided if the trust owner had a financial advisor who annually reviewed his accounts and estate planning with him.

IRA with No Beneficiary

Example 2: Husband had named his wife as primary beneficiary of his IRA, but he failed to name a contingent beneficiary. Wife died first. Then when husband died, there was no IRA beneficiary. With no named IRA beneficiary, the IRA had to be paid to the estate, and in many instances, it required probate.

Financial advisors will make sure you have named a contingent beneficiary. And, when the first spouse dies, will make sure the surviving spouse has named a new primary and contingent beneficiary.

Liquidating Accounts in a Turbulent Market

Example 3: The trustee's job in a trust administration is to protect the trust assets for the benefit of the beneficiaries. In a down market, should the trustee liquidate, or wait until the market goes up? The trustee could get into trouble if she tries to play the role of financial advisor. Why not lean on a real financial advisor who might advise the trustee to liquidate the account gradually, call it dollar-cost liquidation. If the trust owner had a financial advisor, her trustee could leverage the advisor's expertise on the timing of the liquidation.

Keep the Investments for the Next Generation

Example 4: The beneficiaries could agree to not liquidate the investment account, but instead, to divide the account into separate accounts for each beneficiary. This can be a good solution especially in a down market when the children have faith in their parent's financial advisor and they want to keep the investments intact.

If you would like to learn more about setting up your estate plan and how to make sure it will work, click below.