If your clients are having a child, adopting, or marrying a spouse with children, you may already be meeting with them to discuss the family’s finances—everything from managing current costs to providing for the children’s future. But in those discussions, give them a huge gift: Let them know an estate plan is essential for any expanding family. Let us give you some talking points that can help your conversation.
Point One
Many parents believe they can, on their own, informally designate someone to be their children’s guardian—say through a religious ceremony or just by asking a friend or relative. However, that is not true. Although these ceremonies and discussions are crucial and may be personally meaningful, they are not sufficient to protect minor children. To create an enforceable guardianship (which authorizes a legal guardian to care for a child when parents cannot), a guardian must be appointed in the parents’ will. Otherwise, a child will become a ward of the state, and a judge will appoint the child’s guardian. Without your guidance, the court may appoint someone your clients would not want to serve.
Point Two
Similarly, in an estate plan, there are several options to protect the financial assets your clients have worked so hard to accumulate. A minor child cannot directly inherit any property—and a court-chosen representative would be in charge of supervising the inheritance. In many cases, the rules governing investment may cause you to lose the assets under management, because the court-chosen representative must select so-called “safe” investments. Then, at the age of majority, the now-adult child could be handed a check and no guidance on what to do with it. But with a trust, parents can choose a trustee to supervise the assets (potentially keeping them under your management); they can also space out inheritance pay-outs and establish conditions for distributions (such as based on education). And trusts may also protect the family from estate taxes and probate costs all while providing enhanced privacy and flexibility.
Point Three
The same conversation you’ve already started having—preparing for a child’s financial future—is also a conversation to have with clients who are becoming grandparents. They may already have ideas on how they want their children to inherit, but now they should examine these plans, in light of the next generation. Do they want to provide for their grandchildren now with gifting during life? How does that affect their tax planning and estate planning after death? Have they considered a health and education trust for their grandchildren? Will their grandchildren be contingent beneficiaries (only unless their parents are deceased) or do your client’s want them to receive something more directly? Lastly, are there any family heirlooms, treasures, or legacy items that they may want to pass on? Legacy lies not just within financial wealth, but our life story and lessons. Have your clients considered how to preserve that for their grandchildren?
Point Four
And of course, if parents already have one or more children, but there’s another child about to come along, then it’s time to revisit any existing plans—just to make sure that they’ll properly address the new, growing family’s needs. Is the new child accounted for in the planning? How will resources be allocated differently? It is also a good opportunity to revisit guardianship nominations. Have relationships with named guardians changed? Will the same people be able to raise a newborn or another child? Have the intended guardians actually been properly legally named (not just talked about)? Do your clients have a Family Protection Plan that names temporary and permanent guardians, has caregiver instructions, and emergency cards?
When you commit to growing and effectively managing your clients’ wealth, you can also ensure that their estate plans match their needs: As families grow and evolve, so too must estate plans.
We are here to answer questions, address concerns, and help you protect and nurture your clients’ financial futures.
