Answer Your Clients’ Nontax Estate Planning Questions

December 1, 2023 |read icon 7 min read
A financial professional meets with her clients to answer their nontax estate planning questions.

Those who work as financial professionals deal with clients’ estate planning issues every day. When advising clients, some tend to focus heavily on tax issues—including income, estate and generation-skipping taxes. While tax planning is a big part of estate planning, taxes aren’t necessarily the first question on a client’s mind when beginning the process. This is especially true for those who are starting an estate plan for the first time. Ultimately, the answers to these nontax estate planning questions may have a significant impact on the plan.

Why do I need to prepare a will or trust at all?

At death, the law provides a procedure by which personally owned assets are transferred from the deceased person to someone else. A person may give direction about the designated property with a:

  • Will.
  • Beneficiary designation.
  • Transfer-on-death (or pay-on-death) designation.
  • Specific titling.
  • Contract.
  • Living trust.

Even with so many transfer options available, a will or trust is still necessary for most clients. A person who dies without a will is said to be intestate. Those who die intestate have an estate plan imposed on them by the state in which they lived at the time of their death. Any personally owned asset subject to probate will be governed by the rules of intestate succession.

What is probate, and why should I avoid it?

Probate is the court supervision of the transfer of assets. On its face that seems OK. Where family members don’t get along, the idea of having a probate judge act as referee seems like a good idea.  However, probate has its drawbacks:

  • It’s public.
  • It’s structured, and it takes time.
  • It can be expensive.

While some decedents’ estates would probably benefit from going through probate, most clients making plans will opt to avoid probate if possible. The reason is simple—they want to make it as easy as possible on those who oversee settling things after death.

How can I protect my young children?

Those who are creating an estate plan are usually interested in making contingency plans for their young children. The contingency plan should cover the logistics and financial aspects of caring for the children.  The logistical part of the plan hinges on making the decision about who will raise the children—that is, act as guardian—in the event no parent is available. In most jurisdictions the best place to name a guardian is in the will.

Parents should also make financial plans for minors. If a minor is a direct beneficiary of an estate, guardianship must usually be established—often by a court proceeding—to hold the assets for their benefit until they come of age—usually at age 18 or 21. If money is needed for a child prior to the age of majority, the guardian must ask the court for permission to use the money.  Once children come of age, financial guardianship ends.

How can I protect my special needs relative? 

A special needs trust can give comfort to a family because it provides for the special needs loved one while treating other beneficiaries in a fair manner. Funding the trust with life insurance can ensure that funds will be available whenever needed to carry out the trust’s objective.

Typically, a special needs trust is a trust created to support the supplemental needs (as opposed to primary needs) of the loved one with special needs. The goal is to design the arrangement so that public governmental benefits, for which the individual may be eligible, will pay for the primary needs. If properly designed, the trust can supply only those comforts and special items not otherwise provided by public assistance programs to help make life more pleasant. The distributions from the trust are discretionary to prevent claims that the trust must provide for the primary needs of the special loved one. Some specialists suggest that the trust document name other children or other relatives as beneficiaries also. The trustee is then in a stronger position to argue that he has fiduciary duties to consider the needs of all beneficiaries. Share this case study with your clients to illustrate how a special needs trust works.

How do we arrange our affairs to adequately protect all sides of our blended family?

Blended families can present unique issues in estate planning. Because it can seem so difficult to be fair to all parties, it is easy for couples to ignore important planning to avoid arguments. However, this lack of planning causes enormous headaches for the surviving children. When advising the spouses in blended families, the partners have unique considerations, such as, how should distributions for the benefit of the surviving spouse and children ultimately be made?  The answer will help the estate planning attorney make proper drafting choices when putting together the plan.

This case study outlines the estate problems that could arise with blended families.

What non-death documents should I have in my estate planning package?

During the process of preparing an estate plan, clients should consider making advance directives. Unlike wills, which deal with transfers at death, advance directives are aimed at sickness, death or end-of-life decisions. Advance directives are legal documents that provide instructions for medical care and only go into effect if your client cannot communicate their wishes.

The most common advance directives are:

  • A living will specifies what types of medical treatment are desired, which ones to avoid and under which conditions each choice applies. Learn more about preparing a living will.
  • Under a health care power of attorney, sometimes called a health care proxy, an individual appoints another person to make health-care decisions if the client is unable to do so. Learn more about choosing a health care proxy.
  • Under a financial power of attorney, a client transfers their personal right to make financial decisions to one or more agents. The document typically allows the agent to make deposits, write checks, pay bills and conduct other financial transactions on behalf of the client.

How can I keep peace in the family after I’m gone?

Clients who prepare estate plans are often motivated in part by the idea that writing a plan will help avoid family fights after they are gone. Certainly, having a written plan makes distribution intentions clearer, increasing the possibility of family harmony. In some families, clients are comfortable calling a family meeting to explain their estate planning motives and plan details. Having such a meeting may encourage family members to ask questions, promoting a clearer understanding of the testator’s intent. A family discussion may also reveal weaknesses in a plan and encourage fine-tuning of estate planning documents. However, sometimes a pre-death family meeting could be a recipe for disaster. In other situations, clients may want to keep estate plans private, even from close family members.

An estate planning attorney will sometimes insert a clause in a will or trust that is designed to penalize someone if they act in a certain way. But in reality, there’s no sure way to keep family peace after death—particularly in circumstances where one of the family members feels he or she has been treated unfairly.

Next steps for helping your clients with their nontax estate planning questions

Part of the job of helping with estate planning is to make sure a client’s post-death intentions are realized when the time comes. To that end, our clients expect you to have answers to the nontax estate planning questions outlined here. To learn more about these questions and more, check out this white paper brought to you by Advanced Underwriting Consultants and the Ameritas Advanced Planning Team.

To get the conversation started, share Understanding the Basics of Estate Planning article with your clients.

Representatives of Ameritas do not provide tax or legal advice. You may want to consult your attorney or other tax professional for more information.

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