Estate planning can be an unpleasant discussion to wade into. Many clients would rather avoid thinking about the topic. At the same time, some advisors miss out on opportunities to initiate a dialogue about their clients' legacy.
"It's not an easy conversation to start; it can be awkward for both parties," says Susan Stefura, principal at Bespoke Financial Consulting in Toronto. "But it's important to acknowledge that, and make sure that [estate] plans are in order because it can be a real mess otherwise."
To help you broach the estate-planning discussion with clients, here are some tips that can inform your exchange:
1. Plan for current circumstances
Many clients develop an estate plan in anticipation of passing away in the far-off future — when their kids have grown and old age has taken its course. "They try to foresee all possible variations," says Noel D'Souza, financial planner with Money Coaches Canada in Toronto.
But the will should be treated as a flexible document that is revised periodically as people's situations change. Get your clients to consider or evaluate whether their estate plan reflects the life stages their families are at now, suggests D'Souza.
For example, you might pose this scenario: if a client were to die in an accident, would he or she feel comfortable leaving a sizable inheritance to the child before adulthood?
2. Promote transparency
While a client may not want to divulge the full details of their estate plans to their family, D'Souza says, encourage them to be as transparent as possible. You can broach the conversation by asking what their children's relationship with each other is like.
Make clients aware of the potential fallout of holding off a discussion, which gives their heirs a general idea of how — and why — they want assets distributed a certain way, D'Souza says.
For example, one child might be due for a bigger inheritance than the other, because he or she took charge in caring for their elderly parents. If your client wishes to give a larger portion to one child over another, he or she should make an effort to give context to that decision, D'Souza says.
The relationship might otherwise be tested or damaged if your clients' reasons, however legitimate, are withheld.
3. Address your rationale
Frame the estate-planning discussion around your clients' overall goals. They might be less inclined to dismiss the subject if you can connect your rationale for initiating the discussion to their financial objectives and values, says Kelly Rivard, vice president and will and estate consultant at RBC Wealth Management Services in Toronto.
"They should be direct with clients and let them know that how their accounts are structured can impact whether their goals are achieved," Rivard says.
4. Refer them to an appropriate specialist
Though you may not be able to field all of your clients' queries, you can direct them to a specialist whom you trust, Stefura says.
"It's not about having all the answers," Rivard says. "These are complex legal and tax issues that need to be looked at."
You should have at least two to four estate lawyers or specialists who you can refer clients to, she adds. Some people may require less complex advice, while others may have a gender preference.
This is the first part in a two-part series on estate planning. Next: Common issues to look out for.
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