The Most Overlooked Estate Planning Documents

If you’ve been in the financial service industry for some time, you’ve probably had a client who has either lost their mental capacity or passed away.  These experiences can be tough not only for the families involved but they can also put your role as a financial planner to the test.  You are often among the first to be contacted by the spouse or family when something happens to a loved one.  As clients are experiencing the emotional stress that comes with an incapacity or loss, they often rely on their planner to help them with the endless decisions, notifications, arrangements, and other financial matters.  When you have a holistic financial planning relationship with a client, you have a complete understanding of the their financial world along with the their goals and wishes.  With this knowledge, you can become a trusted resource for the family and make a very difficult experience a bit easier.

When clients hear the term estate planning they often think of the basic legal documents such as a will, powers of attorney, and advance directives.  While these documents are the foundation of any estate plan, your client’s plan should also include other documents that are often overlooked, like a long term care plan, letters of instruction, and letters of intent.  These documents can provide loved ones, executors, and survivors with important information that is not covered in most legal documents.  Encouraging clients to have a complete estate plan in place can ensure that their family and financial goals are met.  It also helps planners deepen client relationships, as it allows planners to coordinate with other advisors and gather information about the client’s complete financial picture.

The Importance of Long Term Care Planning

Planning for long term care goes beyond finances and insurance.  It also a way to ensure that your client’s family is aware of their wishes if they are no longer able to care for themselves.  In many cases, family members provide long term care services and doing so can impact their health, finances, lifestyle, and career.  Spouses can become stressed as they transition to the role of caretaker and siblings may have disagreements about who is responsible for parental care.  By creating a plan, clients can give family members direction before it’s too late.

Long term care planning can be done at any time, but in many cases clients should coordinate their long term care plan with their retirement plan and start the process in their early 50s.  The most important aspects of long term planning are how to finance the costs, where and how care will be provided, and what role family members play in the individual’s long term care.  If you are not sure where to start when it comes to helping a client create a long term care plan, you can start by encouraging your clients to think about their family history, concerns, and preferences.  From there, you can help them discover what options are available and how a long term care event could impact their finances.  There are also many consultants who specialize in this area and can help clients with all aspects of their long term care plan.

Letters of Instruction and Intent

Letters of Instruction and Letters of Intent are often overlooked estate planning documents that provide survivors with important information that is not covered in most legal documents.  These documents are a way to provide information and instruction to named fiduciaries and share values, beliefs, and other knowledge that clients wish to pass on to loved ones.  Many estate planning attorneys have templates or guidelines for these documents but they do not always follow up with clients to confirm that the documents are completed.  Planners can encourage clients to complete these documents and update them as needed.

A Letter of Instruction (also known as a post-mortem letter or family love letter) is an informal, written communication to loved ones and others who may serve in a fiduciary role.  The purpose of this letter is to help family members or designated fiduciaries administer the estate.  Letters of Instruction can include information about desired funeral arrangements, instructions on who would get certain sentimental items or family heirlooms, care and placement for pets, the location of important documents, financial information, and professional advisors.  It can also include electronic data such as login information for online accounts and social media instructions.  Clients with small children can use letters of instruction to provide basic documentation about children (doctors, personalities, social skills, activities, academics, etc.) that would be helpful for designated guardians.

A Letter of Intent (also known as an ethical will or letter of wishes) is a non-binding statement designed to help designated fiduciaries carry out a client’s estate planning intent when administering their estate and trusts.  This statement can be in written form, on video, or both.  It can also address all family members or individual statements can be prepared to address different family members.  With this document, clients can share personal values, beliefs, and other knowledge that they wish to pass on to their loved ones.  Many trusts are drafted for maximum flexibility and allow for withdrawals based on broad “ascertainable standards” like health, maintenance, education, and support.  A Letter of Intent is designed to provide a better understanding of the donor’s intentions to the trustee.

Understanding a client’s estate plan and encouraging clients to consider these often overlooked estate planning documents are invaluable services.  These documents can complete a client’s estate plan and provide clarity that is often not covered in legal documents.  While it’s hard for clients to think about these matters, they can appreciate the peace of mind that comes with knowing they have a well thought out plan and their loved ones will not be burdened with making difficult decisions on their behalf.  Having the ability to provide information and knowledge to your client’s loved ones when they need it most can provide much needed relief and simplify a process that can be daunting for many.

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