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Navigating Estate Planning Updates: A Comprehensive Guide for Financial Advisors

A good rule of thumb is to review estate plans every 3-5 years or when big life events happen. During these reviews, look at how life events, new goals, or personal changes might affect your client's plan. Here's what you need to know.
November 28, 2023

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Estate planning isn't a one-and-done deal. It's an ongoing journey that needs regular check-ins to make sure it's still in line with your client's changing life. 

A good rule of thumb is to review the documents in your clients' estate plans every 3-5 years or when big life events happen. During these reviews, look at how life events, new goals, or personal changes might affect your client's plan. You can also refer back to the original estate planning questions you asked your client to get a sense of what might need to be reviewed.

Here are some life events that could mean it's time for an update:

Tying the knot or splitting up: Getting married or divorced usually means updating beneficiaries, tweaking wills and trusts, and changing how assets are owned.

Welcoming a little one: When a child is born or adopted, it's time to update beneficiaries, pick a guardian, and set up trusts or other ways to make sure the little one's future is secure. Estate planning is a little different for clients with minor children.

Saying goodbye: If a beneficiary or executor passes away, you'll need to choose new ones for your client's will or trust.

Financial ups and downs: If your client's wealth changes, they buy or sell big assets, or their business interests shift, it's time to adjust their estate plan.

You might also need to update a client's estate plan to reflect changes in state laws.

By staying on top of regular estate plan reviews and making updates when needed, you'll help your clients keep their plans in tip-top shape, meeting their needs and goals.

In the rest of this article, we’ll dig into the specific considerations to bear in mind when updating and review your clients’ estate planning documents.

Tax laws

Tax laws have a big say in estate planning, and when they change, it can shake things up. 

As a financial advisor, you need to stay in the loop about tax law changes, like tweaks to estate tax exemptions, gift tax rules, or income tax rates. 

This way, you can help your clients make sense of the tricky tax world.

Here are some key tax things to keep an eye on in estate planning:

Estate tax: This tax kicks in when wealth is transferred after someone passes away. Keep an eye on exemptions and tax rates, as they can change, and adjust estate planning strategies when needed.

Gift tax: This one applies to wealth transferred while someone's still alive. Stay informed about changes in yearly exclusion amounts, lifetime exemption limits, and tax rates to help clients make the most of their wealth transfers.

Generation-skipping transfer tax (GSTT): The GSTT is for wealth transfers to people more than one generation younger than the giver. Changes in GSTT rates or exemptions might affect how this strategy is used in estate planning.

State taxes: Some states have their own estate or inheritance taxes. Get to know these state-specific tax laws and work them into estate planning strategies as needed.

By keeping up with tax law changes and understanding what they mean, you can help your clients create tax-savvy estate plans that hit their goals.

Asset valuation

Getting asset values right is super important in estate planning. It affects things like estate tax, wealth transfers, and making sure assets are shared fairly among beneficiaries. 

As a financial advisor, you can team up with expert appraisers, accountants, and others to make sure assets are valued correctly and kept up-to-date as values change.

Here are some assets you'll need to value in estate planning:

Real estate: Getting real estate values spot-on is key for figuring out estate tax and making the most of wealth transfers. Work with appraisers and other pros to keep property values current.

Investment portfolios: Keep a close eye on your clients' investment portfolios. 

Review and update values regularly, considering market ups and downs, changes in asset allocation, and other factors that affect value. This info will help with wealth transfers, tax planning, and divvying up assets among beneficiaries.

Business interests: If your client owns a business, you'll need an accurate value for estate planning. Business valuations can get complicated, with factors like revenue, cash flow, assets, liabilities, and industry trends to consider. Work with valuation experts and accountants to figure out the business's fair market value and include it in the estate plan.

Personal property: High-value personal items like art, collectibles, jewelry, and cars need accurate valuations too. You might need to chat with specialized appraisers or other experts to find the right values for these items.

By keeping asset values updated, you can spot changes in your clients' estate values and tweak their plans as needed. This way, their plans stay on track to meet their goals and keep taxes to a minimum.

Beneficiary designations

As a financial advisor, you know that picking who gets the assets from accounts like retirement plans, life insurance policies, or annuities is super important. 

These choices can even matter more than what's in a will or trust. So make sure you chat with your clients regularly and help them keep everything updated.

Things to think about:

Main beneficiaries: Help your clients pick who'll get their stuff when they pass away. This could be their spouse, kids, other family, friends, or even charities, depending on what your client wants.

Beneficiary designations bypass whatever’s stated in your client’s will, so it’s really important that the beneficiaries your client chooses match what’s laid out in their estate plan. 

Backup beneficiaries: Encourage your clients to name backup beneficiaries just in case the main ones can't receive or don't want the assets. This helps avoid any hiccups and keeps things from getting stuck in legal limbo.

Family branches vs. equal shares: Clients should decide if they want their assets split by family branches (per stirpes) or shared equally (per capita). This choice can make a big difference, especially if a main beneficiary dies before your client.

Special needs beneficiaries: If your client's got a beneficiary with special needs, make sure they set up a special needs trust or take other steps to keep their inheritance from messing with their government benefits.

By keeping a close eye on these designations, you'll help your clients make sure their estate plans match their wishes and avoid any drama or surprises.

Trusts and wills

Wills and trusts are important when it comes to sorting out who gets what when your clients pass away. They need to be updated too.

Things to think about:

Family changes: Life happens – marriages, divorces, new kids, or losing loved ones. Keep an eye on these events, and help your clients adjust their beneficiaries, trustees, or executors as needed.

Who gets what: Sometimes clients want to change how they're dividing their assets among their loved ones. Help them review and adjust their plans so their wishes are clear.

Trust goals: Trusts can do a lot, like taking care of kids, protecting money from people who want it, or lowering estate taxes. Double-check your clients' trust terms to make sure they still meet their goals.

Executors and trustees: These are the people in charge of managing the estate, so it's important to keep their info current. Make sure your clients update their choices if things change.

Plan B: Life's unpredictable, so it's good to have backup plans in wills and trusts. Help your clients review and tweak these plans to keep everything running smoothly.

By staying on top of wills and trusts, you'll help your clients keep their estate plans in line with their goals and wishes.

Durable power of attorney and healthcare directives

Life changes, and so do people's preferences and needs. As a financial advisor, make sure you regularly check in with your clients about their durable powers of attorney and healthcare directives.

Here's what to keep an eye on:

Agent changes: Sometimes clients want to switch their agents because of relationship shifts or other reasons. Help them update their documents to show their new choices for agents and backup agents.

Healthcare wishes: People's healthcare preferences can change over time. Encourage your clients to review and update their living wills so their medical treatment choices stay current.

Law updates: States can change their laws, and that might affect powers of attorney and healthcare directives. Stay in the loop on legal changes and help your clients keep their documents in line with the law.

By staying on top of these documents, you'll help your clients make sure their wishes are respected if they can't make decisions for themselves.

Charitable giving strategies

As a financial advisor, remember that your clients' giving goals and tax situations can change. Keep an eye on their charitable plans in their estate plans to make sure they still align with their objectives and maximize tax benefits.

Here's what you should focus on:

Update bequests: Clients may want to change the charities they support, the amounts they give, or how they distribute their gifts. Help them update their wills or trusts to match their current goals.

Check existing vehicles: It's a good idea to reevaluate existing giving vehicles like donor-advised funds, charitable trusts, or life insurance policies. Make sure they still fit your clients' needs and help them make any needed adjustments.

Adapt to tax law changes: Keep up with tax law changes that could impact charitable giving strategies. Help your clients update their plans to get the most tax benefits.

By staying on top of charitable giving strategies, you'll help your clients keep their estate plans in line with their giving goals and make the most of tax benefits.

Business succession plans

Life changes, and so do businesses. As a financial advisor, make sure your clients' business succession plans stay updated and effective.

Focus on these key points:

Update successor choices: If family relationships or potential successors change, help clients reassess and update their plans.

Adapt to business changes: Growth, restructuring, or industry shifts can impact succession plans. Help clients adjust their plans accordingly.

Review buy-sell agreements: Make sure buy-sell agreements still align with clients' objectives and account for changes in business valuation or ownership. Update as needed.

Stay current with tax planning: Changes in tax laws or clients' financial situations might call for updates to tax planning strategies. Help clients explore new ways to minimize tax liabilities.

By keeping business succession plans up-to-date, you'll help clients ensure their businesses thrive, protect their legacies, and address potential tax concerns.

Estate liquidity plans

Changes in a client's finances, family, or estate planning objectives may require some adjustments to their estate liquidity plans. As a financial advisor, it's your job to help clients periodically assess the liquidity needs of their estates and update their plans accordingly to prevent unnecessary hardship for their beneficiaries.

When reviewing and updating estate liquidity planning, some key things to consider are:

Revising expense estimates: It's important to work with clients to update their estimates of potential estate expenses, taking into account changes in asset values, tax laws, or personal circumstances. This will help determine the appropriate amount of liquidity to provide for these costs.

Adjusting life insurance coverage: Clients may need to update their life insurance coverage to better align with their estate liquidity needs or account for changes in their financial situation, such as acquiring new assets or paying off debts. Financial advisors should help clients assess their life insurance needs and make any necessary adjustments to their policies.

Reallocating assets: Clients may need to reallocate their assets to ensure they have enough liquid assets to cover their estate's anticipated expenses. Financial advisors should review clients' asset allocations and help them make any necessary adjustments to maintain an appropriate balance of liquid and illiquid assets.

Adapting to tax law changes: Changes in tax laws can impact estate tax liabilities and other estate expenses. Financial advisors should help clients assess the impact of these changes on their estate liquidity needs and adjust their plans accordingly.

By regularly reviewing and updating clients' estate liquidity plans, we can help ensure that their estates have the necessary resources to cover expenses and prevent unnecessary hardships for their beneficiaries. 

This proactive approach to estate planning can provide clients with peace of mind and confidence that their estate plans will continue to achieve their intended goals and objectives.

Review your clients’ estate plans with Snug

With Snug’s estate planning software for financial advisors, you can upload your clients’ estate plans and get a full breakdown of which documents are in good shape and which might need updating. It’s all part of our Estate Report.