'Generalist' advisors add estate planning value, from trusts to tax efficiency

Estate planning is a delicate and complex topic. While your client will likely need specialists such as estate attorneys and accountants to create and execute their estate and trust documents, their interests are best served by first having a conversation with a "generalist" — in other words, their trusted financial advisor.

Unlike experts, whose knowledge of the client can be limited and who often bill by the hour, the financial planner can help clients better understand their options and identify their unique legacy objectives. Even if you don't have all the answers initially, asking the right questions early on can identify existing gaps and uncover opportunities for clients down the road.

As a bonus, a recent survey conducted by Raymond James found that the great majority — 82% — of individuals with $500,000 or more in investable assets reported that working with a financial advisor increased their confidence in their wealth transfer plans. 

Typically, I introduce the topic of estate planning early on in my conversations with prospective clients, opening a dialogue about their values and goals, their families and their wishes. In addition to gathering crucial data, this helps set the tone of the relationship by letting them know that my focus stretches well beyond investments.

Once a relationship is established, current estate plans are reviewed and adjusted. Does the client have basic documents in place? At a minimum, these should include a will, a power of attorney and a health care proxy. If a plan isn't in place, we will build one based on the client's unique circumstances. For simpler situations, the three documents mentioned above may suffice. For more complex situations, additional steps are needed to ensure a comprehensive estate plan is established, a process that may include collaboration with outside centers of influence, specialists within the firm or a combination of both to ensure the client's wishes and needs are met.

Estate planning is often a daunting task for a client who is new to the process. That is where the advisor steps in. If the client does not already have estate specialists that they connect with regularly, you can add tremendous value by recommending trusted professionals in your network and preparing your client with the necessary information to have a constructive meeting. When your client is ready to meet with an attorney or another specialist for the first time, having a direct conversation with the specialist first ensures a white-glove handoff where both parties are fully informed and acquainted. Working relationships with trusted CPAs, attorneys and other centers of influence can also provide a powerful avenue for practice growth through referrals.

Trust factors

Once an estate plan is in place, it's good practice to review it each year to confirm that beneficiaries are up-to-date and that documents have been properly updated and executed. Significant life changes like the birth of a new grandchild, a divorce or the loss of a spouse should also prompt a check-in. This is a simple safety check that can save clients from significant consequences down the line. 

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Trusts are powerful, flexible tools. You don't need to be an expert in all the nuances, but as your book of high net worth business grows, you'll want to add them  to your repertoire. In addition to their role in wealth transfer and risk management, trusts are also useful when dealing with complex family dynamics including addiction, infirmity and special needs. 

Beyond providing advice and connecting clients with trust specialists, you can continue to be involved in a client's estate plan by managing the investments held in their trusts and providing insight into the roles, responsibilities and options for trustees. If your client's potential trustees aren't up to the task, a corporate trustee may be elected. Even the most well-ordered estate plans can be shaken by dysfunction, which you can help mitigate with your personal knowledge of the client and their family dynamics.

Tax-efficient strategies

The Raymond James survey mentioned above also found that 37% of respondents answered "no" or "not sure" when asked if their wealth transfer plans included tax-efficient strategies. Meanwhile, 91% of respondents said tax efficiency was "extremely" or "somewhat" important to them, presenting a clear gap to be filled.

Is the client's estate plan tax-optimized? When intergenerational wealth transfer is part of a plan, it is critical to stay on top of the always-changing rules and regulations surrounding estate planning — estate taxes, gifting limits and changes in legislation, to name a few. A timely example of this is the federal lifetime gift and estate tax exemption limit — the amount of taxable assets that can be gifted tax-free over an investor's lifetime. The limit was nearly doubled in 2018 as part of the Tax Cuts and Jobs Act and is set to revert to the pre-2018 exclusion level of $5 million (adjusted for inflation) on Jan. 1, 2026. For high net worth clients, this is a challenge that requires a well-ordered, long-term strategy. You don't want to be caught flat-footed when this change goes into effect. 

I've yet to meet a client who wasn't ultimately glad to discuss their estate plan, even though it initially forced them to think through difficult life-and-death situations. Indeed, more and more of my wealthy clients are coming to understand the importance of discussing complex planning issues — even ahead of investment topics.