Essential components of every estate plan, regardless of client’s net worth, include a Will, a Power of Attorney, and a Health Care Proxy. Some circumstances require the use of a Trust (for the purposes of special needs planning, asset protection, Medicaid/elder care planning, estate tax mitigation, and probate avoidance). Those with potentially taxable estates may consider strategies such as gifting, annuity trusts, charitable trusts, life insurance trusts, personal residence trusts, installment sales and promissory notes.


A financial advisor should work together with your attorney to figure out the plan that is most appropriate for your individual situation. Since most people see their financial advisors more frequently than their attorneys, it falls to the financial advisor to oversee that the plan developed with the attorney is actually implemented and remains appropriate.


There are several planning issues that the financial advisor should focus on:


1. Power of Attorney. A good financial advisor should always ask a client whether or not they have a Power of Attorney. This is the single most important document for a client, as it allows someone else (the “agent”) to handle the client’s financial affairs.


2. Funding Trusts. A good financial advisor will ensure that after the estate planning attorney creates a Trust, the assets are actually transferred to the Trust, accounts are properly retitled and thus the Trust is funded. Many expensive plans are completely thwarted and are rendered ineffective after the execution of documents if the client fails to follow through and actually transfer the accounts to the Trust.


3. Beneficiary Designation. A good financial advisor will ask about beneficiary designations. It is very important to understand that beneficiary designations on accounts will take precedence over any instruction contained in a Will. Even though a client may have a Will leaving everything to charity, if the financial account names the client’s children as beneficiaries, then such account will vest in children upon the individual’s death and will not be distributed to charity, contrary to individual’s original intentions.


4. Account Titling. A good financial advisor will ask about account titling. For example, a husband and wife may own a brokerage account jointly. Even though the wife’s Will states that her children from a previous marriage should inherit the assets in the account upon her death, the property owned jointly by the married couple bypasses the terms of the Will, and hence, the surviving spouse will inherit all such assets in their entirety.


5. Determining Which Assets to Gift. When a client creates an Irrevocable Trust, it is most beneficial to heirs to have those assets transferred to it that have the highest basis, otherwise the heirs may have to pay a large capital gains tax upon the sale of the Trust property. Thus, life insurance and cash are usually the best candidates for a transfer to an Irrevocable Trust. If these are not available, other assets with the highest basis are usually the most appropriate. A good financial advisor will coordinate with the estate planning attorney to figure out which asset should be used to fund a Trust.


6. Determining When a Life Event Requires Change in Planning. Good financial advisors usually meet with their clients on a regular basis (at least annually). Estate planning attorneys, on the other hand, have little contact with their clients once documents are signed. A good financial advisor will determine when a life event (divorce, remarriage, disability, birth of a new child, drug addiction, creditor claim, etc.) may require updating estate planning documents.


Please contact Sverdlov Law PLLC at 212-709-8112 or if you need help with your estate planning or coordinating with your financial advisor.