First Priority: Last Will

The first step in legacy planning is to ensure your clients understand the importance of creating their will now.

By George R. Shadie, AEP, CLU

Legacy planning is not just for the wealthy. All of your clients have a legacy to pass on to the next generation. Most have much more than they realize when they consider assets such as life insurance policies and pensions. The question is whether you, as the trusted advisor, have done your job in making sure their legacy goes to their intended recipients, rather than the government.

The first step of legacy planning is a will, which clients sometimes know by its old term: last will and testament. When I host seminars, I always begin by asking how many in the room have a will. On the average, 40 percent raise their hand. The truth is, everyone in the room has a will, but 60 percent of them are allowing their state legislators to write it for them.

A will is the financial blueprint for the distribution of your clients assets after death. When someone dies without a will, the state steps in and makes the decisions for them. All of the financial planning you put in place for your client can go out the window, leaving the government rather than their loved ones first in line to inherit your clients assets.

As the trusted advisor looking out for your clients best interests, one of your first steps should be to inquire about your clients will. If they havent written their own or its not up to date put them in touch with a good attorney who can help them safeguard their legacy. Nurture solid professional relationships with the estate attorneys in your community.

If you have trouble convincing a prospect or client that they need a will, following are the facts you need to answer their objections:

MY ASSETS ARE SO SMALL THAT A WILL IS NOT NECESSARY.
Most people dont think they have an estate to pass on. The truth is, your clients are generally worth more than they realize. Even if some of their possessions do not hold great monetary value, they could hold an enormous amount of sentimental value and thats something you cant put a price on. Failing to indicate who receives these treasures can cause friction between family members that lasts for decades and generations. Thats not the legacy they want to leave.

I do a lot of planning for retiring government workers. They are amazed when I show them that their assets, including their pension, often exceed $1 million. Few people take the time to add up their assets and properly value their pensions.

Consider a young couple who each buy a $1 million term life insurance policy. That death benefit could create a significant legacy for their children or a nightmare if they didnt write their own will.

WHEN I DIE, MY SPOUSE WILL GET ALL OF MY ASSETS.
Not necessarily. With todays multiple marriages and without a self-authored will, disposition of assets can get very messy. Your clients could inadvertently disinherit the very people they intended to protect. Any assets held jointly with right of survivorship automatically pass to the joint owner. Some states are marital property states and have special legal requirements that may upset your clients and destroy families. Assets with a beneficiary designation, such as individual retirement accounts, life insurance, annuities and investment accounts, generally pass as stated on the beneficiary form.

What happens when the surviving spouse dies? What happens if the beneficiary dies or if the client no longer wants that beneficiary to inherit their assets? What if they remarry? If the ex-spouse has custody of the minor children, they can control their assets. Will the children receive their share at too early of an age? Does the surviving spouse have the financial skills to manage the family wealth? Is there an interfering relative?

Early in my career, I did a check-up for a good friend and found that he still had his ex-wife listed as a beneficiary on a large life insurance policy. Obviously, he, his current wife and family were quite grateful to me. Offer to review your clients documents. Many times, you will find serious errors.

I CAN CREATE MY OWN WILL AND SAVE THE LEGAL COSTS.
Do-it-yourself wills often do not contain all of the necessary components as required by state law. Anyone who might benefit from an invalidation of the will can contest it, and if the courts decide in his or her favor, your clients estate may have to pay all legal costs. Caution your clients against saving a few dollars now at the expense of costing their loved ones thousands of dollars later. Drafting a will can be difficult based on family and type of assets, and is not an endeavor your clients want to tackle on their own. Its important that they call on the services of a competent estate-planning attorney, who can help them:

• Determine what type of will is needed.
• Decide how their assets should pass on.
• Change the terms of an existing will to bring it up to date.
• Save on estate, gift, income and state inheritance taxes.
• Take advantage of estate planning opportunities they might overlook.
• Keep them informed of changing laws that affect their estate.

I DONT WANT MY FINAL WISHES TO BE SET IN STONE. ILL CREATE A WILL LATER IN MY LIFE.
The terms of a will can change as often as needed. Legal experts agree that a will and documents should be re-examined periodically to make sure they are up to date. Every three years is a good plan. Your clients will and financial plans should receive a checkup whenever there is a substantial life change, such as a birth, marriage, divorce, new job, new home or new business.

Creating a will forces clients to come face-to-face with their own mortality, and dealing with death is difficult. But, it will be much more difficult for their loved ones if they dont author their own will. Procrastination is costly. Help your clients seek the services of a qualified attorney to draft their will. A little detective and repair work now will give your clients peace of mind and make you their dear, trusted and most important member of their financial team.