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Financial Planning > Trusts and Estates > Estate Planning

The Estate Plan

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New Directions 

At some point in their careers, many senior market advisors start to move beyond sales to incorporate more estate planning work with clients. It’s a logical progression because seniors are naturally more focused on estate planning than younger clients. Additionally, older clients are often wealthier and need a wider range of advice, products and services. Senior Market Advisor asked several successful advisors how they transitioned to estate planning.

Lay the groundwork

Greg Gagne, ChFC, with Affinity Investment Group, LLC in Exeter, N.H., started as a financial services rep for MassMutual fresh out of college in 1992. The early years were difficult, he admits: “I was squeaking by but I was having a very difficult time managing the peaks and valleys of being in the transaction-orientated business. I was desperate to find a method where I could have recurring revenue…that’s why I moved toward a fee-based model.”

Gagne spent about a year talking with centers of influence, such as CPAs and attorneys who worked with older clients; he also started learning about the financial and personal issues that seniors encountered. At the same time he started developing his technical knowledge. “I needed to become versed in probate avoidance, different types of ownership and how that works for estate planning, utilizing trusts, powers of attorney and basic legal documents,” he says. “Once I garnered that knowledge I began implementing it with each and every client that we work with within our firm.”

Plan the transition

Irv Birnbaum, CLU, ChFC, CFP, came to financial services with MetLife in Chicago after working as a chemical engineer and running a computer business. His analytic skills led to his interest in more sophisticated, complex cases and now estate planning accounts for about half his business.

Birnbaum’s suggestion for advisors considering the estate planning market: develop a business plan. That plan should include advanced professional education—Birnbaum recommends the Accredited Estate Planner program that the American College offers. Determine how you’ll market yourself to accountants and attorneys, he advises, and don’t hesitate to explain that you’re seeking reciprocal referrals as well.

Don’t sell yourself short

Steven Plewes, CLU, ChFC, started out in 1976 as door-to-door debit salesman for Prudential Insurance. Today he owns Advisors Financial Group in Gaithersburg, Md., and many of his clients are corporate executives and widows. He cautions that moving from sales income to advisory fees can take time and advisors should have adequate cash reserves for the transition.

It’s also important to charge fees that reflect your experience and expertise, Plewes notes. “You want to charge your fees at a level comparable to the other professionals that your clients are working with,” he says. “If the client is working with an attorney who is charging $300 an hour and a CPA that’s charging $200 an hour, you can’t bill yourself out at $75 an hour or else you’ve instantly diminished yourself in their eyes. You need to charge something in that same range of $200 to $300 so that they view you as the same level of professional that the other advisors are.”

“I needed to become versed in probate avoidance, different types of ownership and how that works for estate planning, utilizing trusts, powers of attorney and basic legal documents.” Greg Gagne, Affinity Investment Group, LLC

Common estate planning mistakes… and how to avoid them

Estate planning can be complicated and it’s not uncommon for people to make mistakes with their plans. But financial advisors make errors, too, so we asked several advisors to identify the most common mistakes they encounter from other financial planners.

1) Improper beneficiary designations
We frequently see advisors improperly completing beneficiary designations. Examples: Not changing the beneficiary due to divorce or a death or listing a special needs child or grandchild directly as a beneficiary, rather than a trust FBO (for benefit of), thereby affecting their eligibility for Social Security disability benefits.
~Kevin Reardon, CFP; Shakespeare Wealth Management, Inc., Pewaukee, Wis.

2) Not changing asset titles to trusts
Incorporating revocable living trusts into a client’s estate plan but forgetting to update all the account titling to the name of the trust. Not changing titles creates problems that include having to pay additional probate costs, losing the private nature of settling the estate, etc.
~Richard Durso, CFP, AEP; RTD Financial Advisors, Inc., Philadelphia

3) Incorrectly assuming clients’ goals
Many advisors assume a client’s main goal is to save estate taxes, for example. However, when really connecting with a client we might find that taxes are only a small aspect of their objectives. Sometimes in listening to the client we realize that their fears are more about their heirs’ ability to manage the inheritance as well as decisions such as trustees, etc.
~Richard J. Busillo, CFP, AIF, RPA; RTD Financial Advisors, Inc., Philadelphia

4) Naming minor children as account beneficiaries
Letting clients name minor children outright as primary or contingent beneficiaries of life insurance or retirement plans. When minor children inherit, a court must appoint a guardian who must be bonded and must file a laborious annual accounting with the local court.
~ Helen Modly, CFP, ChFC, CPWA; Focus Wealth Management, Ltd., Middleburg, Va.

5) Wrong choice of executors and trustees
Naming a financial institution as successor executor/trustee after surviving spouse or instead of surviving spouse. In some cases this is to the detriment of the spouse and other beneficiaries because large institutions usually follow their fiduciary responsibilities with a less personable approach than another trustee could provide.
~Constance Stone, CFP, ATP; Stepping Stone Financial, Chagrin Falls, Ohio

6) Failure to address medical directives
Many attorneys will draft a health-care power of attorney (POA) and living will. If the two documents co-exist, they may conflict since the POA allows another to make decisions while the living will already states what is to be done. Absent statutory (or document) direction, health-care providers may experience a conflict in what to do.
~Michael C. Foltz, JD, CPA, CFP; Balasa Dinverno Foltz, LLC, Itasca, Ill.

7) Ignoring state estate and inheritance taxes
Many states follow the federal $5-million-plus exemption for taxable estates but the states do not always exempt this larger amount. For example, in New Jersey, estates over $675,000 that are not left to the surviving spouse are subject to a New Jersey estate tax.
~Martha Ferrari, CPA, CFP; Halberstadt Financial Consultants, Inc., Princeton, NJ.

8) Failure to address asset protection
Most couples fear losing their assets to nursing homes. For couples nearing retirement, strategies that protect assets should be explored. Strategies include lifetime credit shelter trusts, life estate deeds, gifting and other techniques that make assets available for use, but beyond the reach of creditors.

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TOM ROWAN breaks down the mystique of estate planning

Tom Rowan, CLU, ChFC, CLTC, started his career with Prudential Insurance as an agent in 1977. After five years in production he spent 14 years in management. In 1996 he transitioned back to financial planning with Prudential under the DBA of Rowan Associates in Harrisburg, Pa. Senior Market Advisor recently asked Rowan for his insights on providing financial- and estate-planning services to clients.

Senior Market Advisor: How do you identify prospective estate planning clients?

Tom Rowan: I think there is a mystique about estate planning—everyone thinks that an individual or a couple has to have a huge amount of assets before they’d ever consider doing anything in the conservation of their estate or the management and distribution of their estate. I typically look at estate planning clients as individuals probably, from an age standpoint, around age 55 and above. They are either near the end of their careers or they’re already retired and they have a substantial amount of assets. The definition of substantial may vary but I would say at least in the range of $1 million to $2 million of assets and above. These clients are candidates to at least look at strategies to try to preserve their assets or to try to either maximize or manage their estates’ distribution.

SMA: What are the most common estate planning mistakes you encounter among prospects?

Rowan: The biggest mistake is that people don’t do anything at all. They feel that there’s always time. The worst plan is to take no action and then have something happen and then it’s like, oh, gee, I didn’t know. I’ve also found the main reason why people do not really address an estate plan is they don’t know where to go and who to trust. It appears that the higher the economic scale, so to speak, the more skeptical individuals are in trying to deal with professional advisors. And, hence, they just don’t do anything. Another mistake is that they put strategies in place maybe 10 years ago and think “I’ve already done my estate plan.” Tax laws have changed so many times through the years and the fallacy is that “I did this once 15 years ago so I don’t need to do it again.” Incorrect ownership of assets is another one. Individuals just plod along in a marriage and say, well, my wife and I own everything together. From an estate distribution strategy and trying to maximize transfers, that’s not good.

SMA: How do you motivate clients to implement your estate planning advice?

Rowan: I’m a fee-based planner. I find by charging that fee there’s a much better chance of the client implementing those strategies because they paid for them as opposed to not paying for them. Also, I ask them very early upfront for permission to stay in touch once I present the recommendations. If they agree to that I’ll routinely call and ask, “Did you contact the attorney yet? Do you want me to contact them for you?”—that kind of stuff. If they don’t put the legal documents in place that revolve around the estate plan then they haven’t done anything to improve the situation.

SMA: Do you believe it’s possible or advisable for someone who is new to the business to focus on estate planning?

Rowan: It is a little difficult for a brand-new person to come in from day one and say, all right, I’m going to be an estate planner. The information that a new person really needs to acquire in this area is substantial. A new person is not going to be learning how-to selling skills, if you will. The estate tax laws and the strategies surrounding those of various trust arrangements and so on are very technical in nature and it’s difficult for a brand-new person to come in and acquire that knowledge upfront. A better strategy is to try to partner with a senior producer or someone that has worked in these areas and actually learned the business, almost like an apprenticeship.