None of us likes to contemplate our own mortality, and that goes double for paying a qualified attorney to create an estate plan. But failing to do so doesn’t delay or deny death—it only makes it more complicated and expensive for the heirs who have to sort out the post-mortem mess.
Here are a few phrases you can use to motivate clients to get their proverbial stuff in order–before it’s too late.
“Pay the lawyer a little now, or a lot later”
Depending on the complexity of the situation, establishing a proper estate plan can cost from a few hundred to several thousand dollars in legal fees. And unless the clients conveniently pass away immediately after the plan is put in place, there may be additional expenses down the road to update the documents to reflect material changes in the clients’ lives, the applicable rules or both.
But all of that unenjoyable expense is more tolerable if it’s looked upon as paying for “insurance.” In this case, spending some time and money now to document the client’s wishes is insurance that can prevent heirs and the estate’s executor from wanting (or needing) to hire (and pay) attorneys to sort out the estate in court, a cost that can easily run into six figures and last for years.
“Save family strife/arguments”
Protracted emotional disputes over inheritances can generate resentment and hatred among surviving family members that last much longer than the actual legal confrontations.
Even the most tightly written estate documents can still be contested; but, the more complete and up to date the documents are, the less likely attorneys will be to take on a case contesting the plan, and the more likely it is that the courts will quickly rule in favor of the wishes of the decedent.
And if the clients have already established their wishes in writing, perhaps disgruntled heirs will be more likely to channel their resentment toward the departed clients, sparing the surviving family members.
“Just want to dot the i’s”
Clients who are, understandably, hesitant to talk about dying will be much more receptive to innocuously going over beneficiary designations of their investment accounts, simply to make sure that those named are accurate, up to date and whom the clients prefer.
Start with retirement accounts, like IRAs and Roth IRAs, but don’t forget about annuities, life insurance policies and pension payments to survivors. And if you really want to spark the clients to make a deeper dive into the overall estate planning process, point out that the beneficiary designations on these types of accounts usually supersede whatever language is contained in the clients’ wills—even if the two contradict each other.
Plus, the transfer of these accounts upon death won’t go through probate. Therefore, the current documented beneficiary could take possession of the asset without the knowledge of other would-be inheritors.
“Give now, and maybe later”
You can mitigate the doom and gloom of wills, estates and death by focusing on how the clients would like to help their family members, friends and favorite organizations right now, and then move on to what happens after the clients’ passing.
Once you provide a figure that can be given away today, without jeopardizing the clients’ financial security, the clients will find that they can get more joy from giving away less money today, than by just bequeathing all their assets at death. As part of this conversation, you can ask the clients if they want to earmark some or all of their assets for charities and, if so, discuss what tax advantages may be available to the clients, either now or at the time of death.
“Account for all the assets”
A safe way to start the estate planning conversation is to offer to assist clients in creating a simple one- or two-page listing of assets and approximate values. The clients may also choose to include account numbers, passwords and contact information for each asset.
This document, although often not legally binding, will not only make the executor’s thankless job easier but also ensure that all assets are accounted for during the settlement of the estate.
It may be helpful to motivate the clients to let them know that, depending on the laws of the state governing their estate, any property that is “missed” during the settlement process could be turned over to the state government, rather than the intended heirs. Hopefully, the clients will keep the listing with the rest of their estate planning documents. They could also give an updated version to their attorney, the eventual executor or you.
“Let’s cut some taxes”
With a current 2022 federal estate tax exemption amount of over $12 million for an individual (and twice that for a married couple), it’s unlikely that estate taxes will be an issue for most of your clients. But there are other taxes that could be an imposition that your clients (or their heirs) would just as soon reduce or avoid altogether.
Start by deciding if it’s better to leave the clients’ IRAs intact, or convert them to Roth IRAs now to allow high-income beneficiaries to avoid a bigger income tax bill. Or leave the IRAs to heirs who are likely to be in a lower income tax bracket, and designate nonretirement accounts and other assets to those who will be in the upper income echelon.
Finally, the older the client, the less likely they may want to sell highly appreciated assets now and pay the associated capital gains tax. Instead, they might want to hold the asset until their death, and allow their spouse or children to benefit from a stepped-up cost basis.
“How do you want to be remembered?”
Establishing an estate plan now will save surviving family members time, money, stress and heartache. And that’s a gift that may be even more valuable than the inheritance.
Kevin McKinley is principal/owner of McKinley Money LLC, an independent registered investment advisor. He is also the author of Make Your Kid a Millionaire (Simon & Schuster).
