Publish date:

Estate Planning Is not Just for the Wealthy

Financial advisers play a key role in helping people determine priorities for transferring their assets.

While estate planning is very important for the wealthy, proper estate planning is needed for clients across the wealth spectrum.

Financial advisers play a key role in helping people determine their priorities for transferring their assets to their heirs. Heirs and beneficiaries might include a spouse, children, grandchildren, siblings or a charitable beneficiary.

The process of estate planning starts with understanding where a client wants their assets to go upon their death. A good exercise is to do an estate planning “fire drill.” This is a walkthrough with a client to show them what would happen to their various assets if they were to die now. This can often be a real eye opener if the results are far different from what they’d expected.


A will is a document that spells out who gets what when a person dies. Assets covered by a will go to those named in the will. This might include certain bank and investment accounts, personal property, collectibles and other assets. It can also specifically exclude those who someone doesn’t want to benefit from their estate.

Advisers should be sure their clients have their will prepared by an attorney who is well-versed in estate planning, including the laws of their particular state. Advisers also should encourage their clients to review their will and have any needed changes made every few years. This is especially true if there has been a life change such as a marriage, divorce, death of a spouse, for example.

Wills can be contested and can end up in probate, a legal process that can be costly to the heirs and can result in assets going to people other than those intended if the will is not properly prepared or not kept up-to-date.

Minor Children

Clients who have minor children should name a guardian in the event that both parents die. If they don’t do this, the court will, and it might be someone other than who the parents would like to take care of their kids. They might also name a separate person as executor to monitor and distribute any assets to the children if they don’t feel the guardian is the best person for this task.

Beneficiary Designations

Certain assets pass to heirs based on beneficiary designations; These are known as “will substitutes.” This means that the beneficiary designation overrides anything that might be in the client’s will regarding the distribution of the asset. Examples include:

  • IRA accounts
  • Workplace retirement accounts such as a 401(k)
  • Life insurance policies
  • Annuities

TheStreet Recommends

It’s crucial that your client ensures that these beneficiary designations are current, especially after a major life change like getting divorced or getting married. For example, if their ex-spouse is listed as the beneficiary of a life insurance policy with a $3 million death benefit, the ex-spouse will receive this money even if your client had intended for it to go to their current spouse.


A trust is a legal vehicle that holds assets for the benefit of the trust’s beneficiaries. A trust may conjure images of the rich and wealthy, but trusts can work well for people at various levels of wealth.

Trusts can be used to ensure that assets are managed for the benefit of heirs until they are ready to manage them on their own. Trusts can be established to hold assets while clients are alive and also be funded upon their death in other cases. An irrevocable trust is a trust that allows the creator of the trust to get the assets placed in the trust out of their estate and not be subject to any estate taxes. In exchange they surrender all ownership of and control over these assets.

From Retirement Daily on TheStreet: How to Create a More Diverse and Inclusive Financial Planning Profession

The use of a trust can have favorable tax ramifications, but it's important to ensure that the client funds any trust that is created in order to ensure that it does what it was intended to do. In many cases this will mean retitling assets in the name of the trust.

Other Considerations

The ownership of property such as real estate, bank or brokerage accounts can determine how these assets are passed on to heirs. Joint ownership of a home with a spouse will ensure that the home passes to the surviving spouse at the client’s death.

For clients who are business owners, succession planning is a key part of the estate planning surrounding the disposition of the business in the event of the owner’s death.

Depending upon the level of a client’s wealth, estate and other taxes may come into play. For clients with complex estates, it is important to have a team in place to properly do their estate planning to include appropriate tax strategies.

People work hard to accumulate whatever level of wealth they have. It’s important that this wealth be distributed to their heirs according to their wishes. A lack of planning, such as not having a will, may cause the intestate laws in their state to dictate how their estate is distributed.