A critical part of the financial planning piece is understanding how accumulated wealth is dealt with over different periods of the client’s lifespan and beyond.
Estate planning involves the complete understanding of all of the client’s needs, wants and desires. To have a discussion with the client on these matters illustrates real trust between the adviser and client. For us, it’s a privilege to be bestowed with this information.
When I began work within the financial planning industry, the discussion of estate planning was nothing more than half a page of a template thrown into the back of the financial plan basically stating “you should go and meet with a solicitor”.
From a compliance point of view, this was a simple way of realising there was a need, but also ensuring you washed your hands of the responsibility of actually having to do anything. Why? Well, how does a financial planning firm get paid for providing estate planning advice?
Upon moving into our own practice, and removing the conflict of being paid only for the money we invested for the client, you can truly understand the importance of understanding a client’s estate planning needs within the financial planning process.
Estate planning isn’t simply about having a will. Or a Power of Attorney. Whilst these are the ultimate outcomes from the estate planning process, it is about the client’s current financial situation, their beliefs, their wishes and how they would like control of assets and wealth to pass to the next generation. It needs to be simple, but effective.
Other issues to consider include: are the assets dealt with by the Will or do they automatically pass onto a surviving spouse/ partner? Is there a binding death benefit nomination within the superannuation structure? Is it correctly positioned? Is it needed? Who will be the executor? Do you trust them? Will they have the capacity to perform the tasks required? Are any of your family members in difficult relationships or with partners who have children from previous relationships? Are there creditors that may have a claim on assets? Are charities or religious groups to be considered? Can assets be restructured or passed on now as opposed to waiting for an estate event? Have you got a family trust and have you considered the passing of control of that trust? Do you have a business succession plan that needs to be addressed in your Will?
The above are just a smattering of the questions we need to consider in conjunction with a solicitor who will eventually draw up the legal documents to ensure the client’s wishes are executed.
Whilst this can be quite a confronting conversation to be had, it’s important that you have it with a trusted adviser, with actions put in place. If not, your loved ones will have a terrible time dealing with the mess left behind whilst also having to deal with the emotional situation at the time.