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Financial Planning > Trusts and Estates > Estate Planning

Estate planning is a winning ticket to referrals

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Estate planning is an add-on service and a necessary offering for financial planners or advisors who wish to be received by the community as comprehensive service providers. Many advisors want to represent themselves as an estate planner, but do not fully understand or embrace such strategies and often overlook opportunities to better their client’s overall situation. Many advisors wait too long to learn about new trends or advance planning strategies, if at all, or worse turn a blind eye on estate planning opportunities to better a client if they construe the service as unprofitable with little impact to their bottom line.

This is the mentality that will make you miss the referral boat. Estate planning is the icing on the cake, the attention to detail and a means to separate you from your competition. A successful practice can be built by adding estate planning to your list of client services and understanding that estate planning, advanced strategies and industry trends will effectively increase your ability to offer comprehensive solutions for the people your serve.

In my practice, adding estate planning services has equated to significantly more referrals, as this service provides a competitive advantage in the market when compared to the capabilities of similar service providers in the area. Our estate planning strategies yield results for our clients, improve their overall situation and will most often move the client to tell friends about the valuable service they received.

Estate planning, by my definition, is the distribution of the assets that you don’t spend in your lifetime to your heirs in the quickest and most tax-advantageous way. And as an obvious benefit to clients, the integration of estate planning services is essential for the growth of your practice. The following five-step process is a proven way to integrate estate planning into your list of service offerings:

  1. Develop a relationship with a local attorney, one who limits their practice to estate planning, as they are generally fair and their work is completed quickly. Remember, the primary goal is not to get a referral from the attorney, but to have a network in place allowing you exceed the expectation of your clients. This interdisciplinary relationship will set you apart. If there isn’t an estate planning attorney for you to work with locally, then seek one who may practice in a town nearby. Finding the right person to assist you in providing complete solutions to your clients will be well worth the effort.
  2. Ask that clients and prospects bring current legal documents for you to review at the next annual review or, in the case of a prospect, the initial meeting. Being able to review this paperwork allows you to see the whole picture and thus offer a more well-rounded solution strategy.
  3. Once you have developed a working relationship with an estate planning attorney, ask that a free consultation on estate planning strategies be offered as a prerequisite for your referral.
  4. Being an active part of the estate planning process means making the attorney available to your clients in your office. Not only do you make the service more convenient, which is always appreciated, you reinforce that you are the driving power behind the comprehensive services being offered.
  5. Take the time to acquire the knowledge and learn what to look for in trusts and other legal documents. You can also ask the attorney to review the documents with you, allowing you to not only learn what is further needed to enhance your client’s financial situation, but also giving you the opportunity to immediately identify solutions to the problems you have uncovered.

As an end-to-end-solutions services provider, you offer valuable, money-saving solutions that are effective and comprehensive, in a way that is of most convenience to your client. Becoming the trusted “go-to” advisor in your community for comprehensive estate and retirement planning will lead to endless opportunities and a steady stream of referrals. However, staying current with estate planning trends and advanced planning techniques will continue to put you at an advantage in your business. The more you know, the more effective your services and the more you will be called upon to advise on the financial and estate planning needs of your clients in their entirety. Not only does that increase your professional role and responsibilities with their personal affairs, but also results in satisfied clients sharing their experience with others who face the same decisions in their lives. Continuous learning is a small price to pay for such substantial end results.

Estate planning strategies have trends and knowing those obscure or specialized approaches for improving a client’s overall situation quickly makes you the first choice when seeking financial services. Below are recent situations as experienced in my practice as well as some insight on how each strategy can be of benefit to a specific situation.

Stretch IRA planning using a trust
Despite the fact that this topic may seem overdone, it is one that will not go away for some time. With $16.4 trillion in qualified plans in this country today, we are approaching the largest transfer of wealth ever experienced in history. We are on the front side of a bubble that should hold strong for at least the next 10-15 years. Now is the time to develop yourself as the expert in wealth transfer and the “go-to” resource for financial and estate planning services in your community.

Can you do a stretch IRA with a trust?
Yes, even despite page 39 of IRS Publication 590, which states that you cannot use the separate account rule in a trust. The separate account rule is the most important rule in setting up a proper Stretch IRA and can still be accomplished when using the right type of trust, and in fact, is the only way to truly guarantee lifetime distributions.

The use of a restricted beneficiary form can work to accomplish similar results, but if it is challenged by an heir or named beneficiary, the insurance company will not and cannot prevent this distribution, making the strategy a less reliable estate planning tool.

Items to consider when utilizing this planning tool include: divorce protection, creditor protection and spendthrift protection, and of course the most common reason for creating a stretch IRA is the power of income tax deferral.

Insured Spousal Roth Conversions
The best type of IRA to stretch is a Roth IRA. In order to transfer your traditional IRA into a Roth IRA you must first pay the taxes. This strategy works well for married couples who do not require their IRS minimum distributions at age 70 ? for living expenses. It often entails the use of life insurance, often funded by the minimum distributions, and the conversion of the IRA to a Roth after the passing of the first spouse. The life insurance benefit can exceed the tax liabilities from the conversion.

These two concepts help the client integrate income tax reduction or elimination strategies. It may be necessary, or at least fair, to tell your clients this to spend their IRA rather than risk losing as much as 80 percent of its value after their death. If you advise your clients to spend, or at least take distributions from their IRA, they could enjoy at least 60 percent of the total after taxes. If not withdrawn, the beneficiaries could be left with only 15-20 percent of the total amount after all taxes are paid.

Planned giving using a foundation
Planned giving options are typically most suitable for clients with little or no family, no children or spouse, with charitable intentions or as directed. Using this estate planning strategy could help the client reduce taxes in the following ways:

  1. Income tax reduction
  2. Estate tax reduction
  3. May eliminate IRD (Income in respect to descendant)
  4. Reduce or eliminate capital gains
  5. Tax free income via a charitable gift annuity
  6. Possible tax free money for heirs or beneficiaries
  7. Bless the annuities involved in your foundation

Be aware of special needs children
This estate planning strategy, although not common, has helped our firm gain even more manageable assets and has increased referrals. When planning the benefit of an estate to a special needs child, keep any potential government benefits the child is receiving in mind. No matter the age, a lump sum of money may disqualify the child from much needed benefits and from government or public programs. Cristofani trusts or 529 Plans are two ways to distribute inheritance or lump sums of money to a special needs child without affecting their current benefits.

Knowledge is power but applied knowledge is king. Providing your clients with this valuable information will not only encourage them to utilize your services for a specific aspect of their estate plan, but also allows you the opportunity to assist with all components of their estate and financial planning needs.

Having a good network of providers will not only help your clients create a more efficient estate plan, it will also set you apart from the other advisors in your community and more specifically from brokerage firms, who are limited in their service offerings.

Integrating estate planning services into your practice could be the best decision you make for your practice. The success of your business, community recognition and consistent referrals are the by-products of becoming a truly comprehensive service provider and will derive from your ability to help others achieve peace of mind in retirement.

Bill Smith, RFC, IAR, is president of Great Lakes Retirement Group, a retirement and estate planning firm based in Sandusky, Ohio. For additional information on estate planning, he can be reached at (419) 626-8600.

Get more out of a life policy with living benefits

The costs of caring for a family member with a terminal illness or confined to a nursing home can be astronomical, introducing financial hardship to an already difficult situation. Over the last few years some life insurance carriers have begun to include Accelerated Benefit Riders in life insurance policies to address this issue.

Accelerated benefits essentially function as living benefits for the insured, because rather than waiting until death clients can access the death benefit while still alive. This can help offset the financial stress for family members helping a suffering loved one.

With most accelerated benefits the insured must have been diagnosed as terminally ill or confined to a nursing facility for a certain period of time.

What are living benefits?
Using accelerated benefits as a living benefit became more prevalent after the Health Insurance Portability and Accountability Act of 1996. Under this regulation a portion of the death benefit can be paid to a terminally ill individual or an individual who meets the tests provided in the regulation as chronically ill.

In some cases the accelerated benefit can pay between 80 and 100 percent of a discounted death benefit. The discount is for early payment of the claim and will vary depending on the policy and whether there is any loan activity.

Easy access to benefits
Accessing the benefits is a relatively easy process, which is critical in a time of crisis. The terms and conditions are typically very straightforward and outlined in advance, and calculations do not necessitate negotiations if an insured does need to use the option. Payment is also quick and streamlined, as recipients do not need to submit bills or receipts.

Another advantage is that clients retain control over how the money from the living benefits is spent. They can use it to pay for nursing home care, medical bills or any variety of expenses.

Cost-benefit advantage
Most carriers include these living benefit features without charging an additional premium. Therefore in many cases advisors can actually increase the all-in value of policies by alerting clients to this feature in their existing coverage, or seeking out policies with living benefits that will not hurt their bottom line.

Additionally, the amounts paid under these conditions prior to death will not be taxable. The death benefits are treated as life insurance proceeds, even though the money is actually being paid to the policyholder before death.

When researching new life protection for clients — whether it be a term, whole or universal product — senior advisors need to choose carefully, finding a policy that allows for maximum flexibility, especially given rising longevity. Look for living benefit features or benefit accelerations that are automatically included at no cost.

For clients that have owned their life insurance policies for a long time, this benefit is often overlooked when they become terminally or chronically ill. If the client’s policy does not have living benefits, some carriers will add them to policies that were issued prior to the introduction of these types of features, free of charge.

Pat McCormick is senior vice president of sales and distribution at Symetra Financial. He can be reached at (800) 706-0700 or i[email protected].


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