For many people, securing assets and other financial means for loved ones is one of their most essential wishes. Estate planning helps ensure that wealth is distributed and protected according to the person’s wishes. Continue reading as we discuss more about estate planning and how financial advisors can help create a plan. 

What Is Estate Planning?

Estate planning is the process of determining who will own and manage one’s assets if the person has passed away or is incapacitated. Beyond honoring the grantor’s financial wishes, estate planning aims to safeguard the heirs from problems such as legal disputes and tax burdens. Without estate planning, your assets may be distributed according to state intestacy laws. As a result, you no longer have control over who receives it. 

What Does an Estate Planning Financial Advisor Do?

Helps Organize Your Financial Picture

One of the primary tasks of an estate planning financial advisor is to help clients develop a clear understanding of their financial situation by organizing and reviewing their assets and accounts. Advisors may also conduct a beneficiary audit of retirement accounts, insurance policies, and other assets to ensure they align with the client’s estate planning goals. And as part of the process, advisors may also recommend naming contingent beneficiaries, who would inherit the assets if the primary beneficiary dies before the account owner.

Helps Coordinate With Your Attorney and Tax Professional

Estate planning advisors also work with other teams such as attorneys and tax professionals. The advisors provide details of financial assets so attorneys can draft legally sound wills and trusts. Tax professionals, meanwhile, assist in pinpointing tax-advantaged strategies to lower tax burdens and maximize benefits.    

A Financial Advisor Helps Keep Your Plan Updated

Estate planning is a process that adapts according to life changes. An estate planning financial advisor helps review your plan in instances that require updates, such as shifting tax laws, major life events, and changes in beneficiaries, to ensure it is legally compliant and still aligns with your wishes. 

Why Estate Planning Should Be Part of Your Financial Plan

Estate planning ensures that your wealth is distributed to the right person, giving you control over what happens to it after you pass away. Structures, such as trusts, built into estate planning also protect your beneficiaries from potential issues, including inheritance disputes, creditor claims, lawsuits, and divorce. 

Key Estate Planning Documents to Know

Last Will and Testament

A last will and testament outlines how your assets will be distributed. Both of these documents become effective after the person’s death. A last will and testament goes through a legal process called probate, in which the court authenticates the will.  

Revocable Living Trust

Also known as a living trust, this is a legal arrangement in which the grantor transfers assets into a trust. The grantor has full control over the trust while still alive. A revocable trust is also flexible. Meaning you can change, amend, or dissolve at any time. 

Durable Power of Attorney

A durable power of attorney is a legal document appointing a person to manage assets if the individual becomes mentally incapacitated. Unlike a standard power of attorney, which expires upon disability, a durable power of attorney remains in effect during incapacity. 

Health-Care Power of Attorney and Advance Directive

Advance Directive and Health-care Power of Attorney are legal tools used in combination to set your medical care decisions if you can’t speak for yourself. This includes naming a healthcare agent to make medical decisions for you and a living will that states your medical wishes.  

Beneficiary Designations

Beneficiary designations provide specific directions to financial organizations about who you want to receive your finances after you die. They can override any declarations in your will and avoid probate court. 

Letter of Intent or Legacy Letter

A letter of your wishes and practical information that would assist family members and trustees in the smooth running of your estate. The document has no legal force and cannot be enforced by institutions or authorities.  

Estate Planning Strategies From a Financial Advisor

1. Review and Update Beneficiary Designations Regularly

A beneficiary is one of the most powerful estate planning tools–bypassing probate court and overriding instructions in your will. Therefore, you want to ensure it is always up to date. Reviewing your beneficiary designations regularly is simple yet effective for ensuring your money goes to the person you intend and for preventing costly legal battles. 

2. Align Your Estate Plan With Your Retirement Plan

Retirement accounts are treated differently from your regular assets. They carry their own tax laws, so if your estate plan is not aligned with the retirement plan, it may result in hefty tax bills for your beneficiary. Ensure to stay informed with the current tax regulations and align your estate plan accordingly. 

3. Consider Life Insurance as Part of the Estate Plan

Life insurance provides quick and tax-free cash. As such, in a situation where your heirs are in need of money quickly, life insurance can provide cash within weeks. This is different from other assets like real estate or retirement accounts, where cashing out can take up a lot of time.   

4. Use Trusts When Additional Control or Protection Is Needed

Trusts offer more protection and control where necessary, such as in complex family situations or for vulnerable heirs. For example, for beneficiaries with problems with money management, or for those who work in high-risk professions such as lawyers or doctors, where funds can be depleted or assets seized in a malpractice suit. Trusts allow you to control your assets, including when and how they are distributed. 

5. Incorporate Charitable Giving Into Your Estate Plan

Charitable giving allows for maximizing tax deductions and reducing the overall taxable estate, while helping support causes that are meaningful. There are many options to incorporate charitable giving into an estate plan — from direct transfers, such as naming a charity as a beneficiary on a 401(k), IRA, or life insurance, to bypass income taxes, to structured giving vehicles like Donor-Advised Funds and Charitable Remainder Trusts. 

6. Prepare for Long-Term Care and Health-Related Costs

Preparing for long-term health expenses can help prevent the depletion of your estate. By combining financial and legal measures, these expenses can be managed effectively. Purchase long-term care or hybrid insurance and maximize contributions to health savings accounts (HSA) to prepare cash for future medical bills. In addition, protect assets and wishes by obtaining a medical power of attorney and a living will. 

7. Organize Digital Assets and Financial Information

Have digital assets and their information organized in a ledger so that beneficiaries can seamlessly access and manage assets. It is also crucial to store your data securely by using a strong password manager, maintaining a master inventory of all accounts, and enabling built-in legacy contacts on tech platforms. 

When Should You Talk to an Estate Planning Financial Advisor?

An estate planning financial advisor is a vital alternative whether you are going through major life events, such as getting married, having children, or getting divorced; have large assets; are dealing with a medical condition; or just want to ensure your wealth is secured for your heirs. Before speaking with an advisor, make a list of your questions and long-term goals, including a plan for your potential beneficiary.  

How Butson Financial Advisors Can Help With Estate Planning

Butson Financial Advisors are experienced financial planners who can help turn your goals into a workable, realistic plan of action, bringing you closer to securing your financial future for you and your loved ones. We offer a comprehensive service that includes crafting estate planning strategies tailored to your specific needs and preferences.  

Contact Butson Financial Advisors today, and let our team of professionals help you pursue your financial goals. 

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for individualized legal or tax advice. Butson Financial Advisors and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.*