(Related: Yes, Millennials DO Need Estate Planning)
Your clients just had a baby.
They’re sleep-deprived, overwhelmed and frazzled. It’s not an easy time to make contact, but it’s a very important time. You know having children dramatically changes one’s legacy plan and makes having a plan all the more necessary — but do your clients?
As someone who co-operates a legacy-planning solution and who has worked in the industry for decades, I can’t tell you enough how important the work you’re doing for your clients is. My LegacyShield business partner and I feel strongly that everyone has a right to a legacy, and that your clients need your help to get there.
For new parents, the need for legacy planning is especially obvious.
Encourage your clients to set aside time to talk through just two high-priority items with you. Starting with a shorter list lowers the barrier to entry. I recommend creating a staggered checklist — starting with today — and setting attainable dates to complete the rest of the tasks. Let them know you’re there to help them and that, today, you’re going to cover only two items. You’ll say to them, “That sounds manageable, right?”
Here are five things to tell them.
This document tells the court a few very important things. For instance, who will care for their babies if something happens to both of them? They’ll want to make sure the guardian they choose is responsible and has their child’s best interest in mind. They need to think about their values. Do they have kids of their own? If so, they need to take their time; this is a big decision.
Next, they parents will want to think about how they want to share their personal belongings and financial assets. If they want their spouse to have access to their money, this is where they say so. Without a will, the state decides what goes to whom. Lastly, it’s important for clients to designate someone to carry out the wishes they express in their will. Their executor makes this happen.
I recommend your clients check or designate beneficiaries at the same time that they create their will, because they need to match. They don’t want their will and designations telling two different stories, because, if there’s a discrepancy, their beneficiary designation overrides their will. The good news is, compared to creating a will, this is easy.
It also makes a huge difference, because any account that has a beneficiary listed automatically avoids probate court. Think of it as a direct deposit; their money gets into the hands of whoever they designate that much faster. They can list a beneficiary on a 401(k), a life insurance policy or even a bank account. For bank accounts, it’s called a “payable on death.”
Once your clients have those two matters taken care of, they can cover the remaining tasks in waves. Whether they agree to tackle them within a few weeks or a few months, the important thing is you’ve gotten them to commit to planning for their future — and the future of their new baby.
It’s a bit more work (and more expensive) to create a trust, but it has some wonderful benefits, particularly if your clients have young children.
Everything included in a trust is protected from probate court, including property, so their family can avoid the court fees and hassle.
Another great thing about a trust is that it adds an element of flexibility and customization to your clients’ plans. Do they want their children to receive a lump at 18, 25 or 30, or do they want to distribute it over time? Do they earmark the money for a business venture or private school?
As the person in charge of the assets within the trust, their trustee will distribute funds according to their wishes.
4. Power of Attorney and Health Care Proxy
These are two separate documents, but they’re both used in situations of incapacitation. Their power of attorney and health care proxy designees can make important financial and medical decisions when the clients are incapable of doing that. I grouped these two together because it’s better if they know each other and work well together.
5. Life Insurance
Most clients don’t even consider buying life insurance until they have children, so, if they haven’t thought about it, they’re not alone. They’ll want to consider it now, particularly if they rely on two incomes.
Over the past 40 years, the percentage of dual-income households (with children under 18) has risen dramatically: 30% from 1960 to 2012, according to Pew Research Center.
If your clients are among the few who bought a policy pre-children, they’ll want to consider increasing the amount, so their child is covered if something should happen.
— Read 3 Lessons Prince Left Agents and Advisors, on ThinkAdvisor.
Michael Babikian is the chief executive officer of LegacyShield, a financial services exchange built around a family information management system.