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Make Sure Clients Sweat the Small Stuff on Estate Planning

April 3, 2015

This week we interviewed Richard Bryan of Partners in Financial Planning in Salem, Va. Bryan recalls revamping his firm’s approach to estate-planning documents after he had to give a widow bad news.

My firm works with a lot of widows — not particularly by design, but through a process of word of mouth. That’s how we came to work with one particular client a few years ago. Her husband had recently passed away — and we were helping her handle the paperwork and sort through the bills, while also developing a comprehensive financial plan for her future.

She told me her husband had an IRA that named her as the beneficiary. But when I reviewed the paperwork, I saw he had filled out and signed a form naming her as beneficiary without actually mailing it in. I had to break the bad news that the IRA funds would be going to the previously named beneficiaries on the account, her husband’s two adult children from a previous marriage. It wasn’t our fault, of course; we hadn’t retained her as a client until after her husband passed away. But I still felt terrible that her future might be in jeopardy because of a simple paperwork oversight.

In this case, the situation ended up working out OK for my client. She was the named beneficiary on her husband’s life insurance policy, and she was still working. Those two sources of income allowed me to draw up a plan that put her on the path to a comfortable retirement. Still, her situation stuck with me. I never wanted to have to break that kind of news to a client again.

My firm decided to overhaul the way we approach estate-planning documents and beneficiary designations. We’re a comprehensive financial-planning firm, so estate documents were always one of our focus areas. Previously, if clients didn’t have all their paperwork in order, we’d definitely remind them. But we’d probably bring it up once at the annual review meeting, without following up. The widow’s situation helped us realize we weren’t doing enough. If you just ask clients whether their beneficiary designations are up to date, there’s a risk they’ll say, “Yeah, I think I took care of that,” when they really haven’t. I don’t blame them; life gets in the way.

Now, we’re much more thorough. We give clients a list of the documents we have and the ones we’re missing. We’ll show them their current beneficiaries and ask if the designations still reflect their wishes. We ask about secondary beneficiaries, too. And we ask for copies of all the documents; we don’t just take a client’s word for anything. Sometimes, a client may not have looked at an estate-planning document for a decade — and in the intervening years he’s gotten divorced or had a couple of kids. That’s why we also try to make sure beneficiaries are integrated into the overall estate plan.

I think it’s important for advisors to realize clients hire us in part because they don’t want to keep track of these things themselves. Either they’re too busy, too disorganized or just not inclined that way. So it’s important for us to check up on things they might let fall through the cracks.