Estate Planning Specialist
With over 50% of Americans not having a will or trust, there is a strong need for a Certified Estate and Trust Specialist. An estate planning specialist can help a client decide who gets what and when; a trust allows someone to control their estate “from beyond the grave.”
As part of “the science of money management,” estate planning involves quantifying financial options to determine the type, amount, risk level, and duration of investments. These strategies can significantly help secure the financial future of the person creating the plan as well as subsequent heirs.
Estate Planning Specialist: 8-Step Process
As one of our most popular designations, IBF details the important pieces of the process to give its students real-world understanding of the important role they play in the estate planning process. The eight steps of estate planning are:
- inventory all current investments (while checking how accounts are titled)
- determine what the client is trying to do with his or her assets
- find out client’s risk level, time horizon, and tax bracket
- make recommendations to maximize client’s objectives
- review existing estate plan
- inform client as to possible alternatives
- ensure strategy used fulfills client’s wishes
- implementation
Estate Planning Specialist Step 1: Inventory
The first step is to list all investments and find out how these assets are titled. Knowing the dollar value of each investment and where it is held is critical. It is virtually impossible to have an effective financial or estate plan without knowing what one owns and where it is held. Titling is equally important since a client can only convey or have access to assets that he or she has a partial or full ownership interest. For example, if an asset is titled as “John Smith and Mary Jones, JTWROS,” John becomes the sole owner upon Mary’s death (or vice versa), regardless of the wording of either John's or Mary’s will or trust. Similarly, an account with a POD designation (payable on death) will trump any reference of the account in a will or trust.
Estate Planning Specialist Step 2: Client’s Intentions
The estate planning specialist’s major concern should be protection: making sure the current financial plan matches client goals and objectives while alive. The impact of any estate plan is greatly diminished if the value of one’s assets plummets prior to death. All too often, investors are unable to describe the risk level of their existing portfolio or even verbalize their target return.
Estate Planning Specialist Step 3: Client Parameters
Once a client’s objectives have been determined, the estate planning specialist’s next step is to make sure the portfolio’s risk level, projected return, time horizon, and tax bracket are acceptable to the client. More often than not, asset risk level does not match the investor’s tolerance for volatility. And, in most cases, tax efficiency has not even been considered.
Estate Planning Specialist Step 4: Recommendations
A chief benefit of using an educated advisor is objectivity and ideas. The specialist can make recommendations that match what the client is trying to accomplish. Unlike the individual investor who may have misconceptions or biases about a specific investment or strategy, the advisor can be neutral and offer suggestions the client likely never thought of before.
Estate Planning Specialist Step 5: Review Estate Plan
It is only at this point the estate plan should be reviewed. The first four steps helped to ensure the client is protected and that things such as risk level, projected returns, taxation, and expected holding periods match the client’s goals. The client can now focus on how assets are to be distributed or overseen after death. The estate planning specialist’s role at this juncture is similar to what was done during the previous four steps except the focus is on the beneficiaries.
Estate Planning Specialist Step 6: Possible Alternatives
Assets are passed from one person to another by gift, will, trust, account titling, or intestate succession (no valid will). There are advantages and disadvantages to each of these methods. For example, certain trusts will avoid the cost and delay of probate but assets inside a testamentary trust do not. Gifts are an effective way to transfer up to $14,000 per year per donee (plus each donor has a 2013 lifetime exemption of $5.25 million), but many clients do not wish to lose control of the asset while alive.
Account titling, such as a POD or JTWROS, will avoid probate for that asset, but a JTWROS titling could result in having to file a gift tax return while the donor is still alive. Moreover, joint ownership results in a loss of complete control over the asset. A will is necessary if there are minor children, but assets controlled by a will are subject to possible probate. A living trust can protect its creator as well as trust beneficiaries, but the trustor may prefer estate reduction via a gifting program or the use of other types of trusts.
Estate Planning Specialist Step 7: Fulfilling Wishes
By simply asking the client what he wants to accomplish, the estate planning specialist can tailor a plan that fulfills these objectives. If a trust and will are needed, the specialist can help the client find a cost-effective attorney. In certain situations, inexpensive online sources may be appropriate.
Estate Planning Specialist Step 8: Implementation
As simplistic as it might sound, the implementation and funding of the estate plan is critical. For example, all too often someone sets up a trust but then never funds the trust—thereby completely negating the likely purpose of the trust. In a similar vein, one can have a comprehensive will and trust, but such documents have no effect on JTWROS or POD accounts. For those using a living trust, a pourover will may be the answer for certain forgotten assets—but account titling is still critical for this “catch-all” to work.
As a Certified Estate and Trust Specialist, both financial management and strategic thinking come into play. Having a certification allows you to approach the estate planning process with confidence, making you a much more credible resource to clients and prospects. Successful estate and financial planning give the client peace of mind knowing that the question of the distribution of their assets has been addressed.