Should I Use A Financial Advisor When Planning My Estate?

Should I Use A Financial Advisor When Planning My Estate

One of the biggest misconceptions many people have regarding estate planning is the role of a financial advisor. For the most part, many people consider the task of planning a living trust or will is limited strictly to attorneys. But the role of an administrator in estate planning is relatively broad, and one that can encompass anyone from a trusted family friend to an attorney on retainer. And more frequently in recent years, financial advisors.

While financial advisors and attorneys frequently work in tandem with one another, the role of the former can be somewhat more nuanced; and one in which their background can sometimes be overlooked. We naturally tend to assume an attorney is relatively well versed in tax and estate law. But what do we really know about the background of a financial advisor? Do they have sufficient experience in private wealth management? Are they empowered enough to act on our best interests? Or are they simply looking out for their own—in the form of a sizable commission?

If you’re considering using a financial advisor when planning your estate, here’s a few things you need to keep in mind.

What Is The Role Of A Financial Advisor In Estate Planning?

One of the chief benefits of having an attorney help plan your estate is to oversee the drafting of documents to better conform to applicable tax laws. And given the complexity of state and federal tax laws, helping your heirs avoid unnecessary liabilities can be a necessary one.

But without proper funding, your assets won’t see their rightful distribution. Which is where your financial advisor comes in. They’re not as much concerned with liability as optimization of your existing estate. A pertinent example would be a 401K. Under Utah state law, a 401K is never entered into probate, nor are they subject to intestate law.  But can a 401K provide you with the best return? How much of your portfolio does it represent? Is there a tax benefit in rolling over to a Roth IRA?

These questions are entirely dependent on the particulars of your estate. But most attorneys will rarely have a background in wealth management. A qualified financial advisor, on the other hand, will generally have at least enough of a working knowledge of both tax law and asset management to suggest the best options for your estate—and how to better accommodate any tax liabilities.

Which doesn’t mean you should exclude an attorney in planning your estate. On the contrary. Whether you choose to establish a living trust or a will, you’re going to need someone legally qualified to help distribute your assets fairly and in accordance with its terms. We’re just suggesting you consider strategy in addition to execution.

In short? An attorney is there for your protection in estate planning. A financial advisor is there for your optimization.

What Types Of Advisors Can Help Plan My Estate?

The term “financial advisor” is a fairly broad term, and encompasses everything from Registered Independent Advisors to high volume corporate equity managers. Often, you’ll find that the differences in private advisors is a question of licensing for most wealth management needs. But for the purposes of estate planning, you’ll find some are better suited than others.

  • Chartered Trust And Estate Planners

As the name implies, a Chartered Trust and Estate Planner is licensed to work almost exclusively in estate management. It’s probably the most common of the three available certifications for estate planners. A CTEP must have three years of experience in estate planning, in addition to an undergraduate or graduate degree in financial services or law as well as additional certification training. A CTEP is not, however, licensed to advise outside of estate planning.

  • Accredited Estate Planners

An Accredited Estate Planner has a much more intensive background in trust and estate management. Most AEPs are licensed to practice law, although at least five years of estate planning and a current position as a CPA or financial planner is a minimum requirement. AEPs with less than fifteen years experience are required to undergo extensive certification training,

  • Certified Trust And Financial Advisor

Certified Trust And Financial Advisors frequently work in both estate planning as well as general wealth management. For the most part, A CTFA is just as qualified as a CTEP to offer advice on estate planning, but their scope can be much more broad. A minimum of three years experience in wealth management is necessary for certification.

Outside of trust and estate specialists, there are two other categories of financial advisors who frequently assist in estate planning purposes:

  • Certified Financial Planners

For many estates, a Certified Financial Planner will have enough knowledge in the areas of financial planning, taxes, insurance and retirement to adequately handle general management. Many organizations are independently run, but there’s also quite a few who work for large scale asset management firms. All CFPs are required under law to disclose any information relating to criminal activity, government inquiry or consumer complaints.

  • Private Wealth Managers

Individuals with a high net worth in liquid assets sometimes turn to Private Wealth Managers. Not only are they more well versed in high income asset protection and tax management, but fees are more accommodating since PWM services are generally only available from larger financial trading institutions. PWMs typically have a much smaller book of business; they’re more concerned with direct management of higher incomes and can afford to take a considerably more personalized approach with their customers.

Which Advisor Is Right For My Estate?

For general estate planning purposes, most administration can be handled by either a CTFA or a CFP. The latter is more common to come by, however, since trust specialists are a somewhat unique certification. More intricate estate management needs are frequently handled by an AEP. Their training is much more extensive, with an additional advantage of legal advice.

Fees for any sort of estate planning service can be quite high, and are frequently based on a percentage of the overall estate—including the value of non liquid assets, such as property. As a result, many homeowners choose to access the equity in their home when planning their estate; even if they have bad credit. They simply don’t want to take a chance on decreased value in a potentially risky real estate market twenty years down the road.

That’s one of the reasons why we established our “Sell Now, Move Later” program  here at Gary Buys Houses. We’ll purchase your property as is, often in as little as 3-5 business days. Not only can we take unwanted property off your hands, we can even help you find a solution that allows you to stay in your primary home.

There’s no question that dealing with financial advisors and attorneys during the estate planning process can often be a confusing one. Shouldn’t you try to simplify the process as much as you can?

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