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When my Uncle Ricky passed away at the age of 41, our family was thrown into a state of emotional turmoil. His sudden departure was not just a personal loss; it became the greatest professional regret my father would ever experience.
Uncle Ricky was a man of great warmth, known throughout western Alaska for his kindness, resilience, and the deep love he had for his family. He left behind two beautiful daughters, barely out of middle school, and a wife who had shared a lifetime of memories with him. Ricky was a friend to everyone, and no one was a stranger to him. Yet, despite his many strengths, he did not have his financial planning in order – a fact that would haunt our family for years to come.
The Importance of estate planning: A lesson learned too late
My father, the eldest of his siblings, took it upon himself to ensure that our family was protected in the event of a tragedy. He made it his mission to talk to his brothers and sisters about the importance of life insurance and estate planning. He knew all too well the consequences of not being prepared for the unexpected.
Despite his best efforts, Ricky always found a reason to put off these crucial conversations. He always thought there would be time to deal with it tomorrow – until there were no more tomorrows left.
This experience has profoundly impacted how my father approaches his work with clients today. When he meets with someone to discuss their financial plan, the first topic he addresses is always estate planning. It’s not just a conversation; it’s a priority. He knows from personal experience that if this isn’t taken care of, the rest of the financial plan is meaningless.
Why estate planning should be the foundation of every financial plan
At Shilanski & Associates Inc., our Registered Investment Advisor (RIA) firm in Anchorage, Alaska, we believe that estate planning is the foundation upon which all other financial plans should be built. We may not have an in-house attorney, but we have established strong relationships with several reputable attorneys in our area.
When a client needs to start the estate planning process, we provide them with three options for outside counsel. Once they have made their selection, the initial meeting takes place in our office. We do this for both the client’s convenience and to ensure that everything gets done correctly.
The role of the financial advisor in estate planning
After the initial meeting, the attorney takes over drafting and executing the necessary documents in their office. We facilitate the introduction and remain involved throughout the process. Once the documents are finalized, we review them in detail, ensuring that all legal preferences have been properly addressed.
Our role doesn’t end once the documents are signed. We maintain copies of all estate planning documents in our files and ensure that our clients have electronic copies stored securely in their client vault. Over the years, we’ve learned that it’s not uncommon for clients to misplace these important papers, especially after moving or other life events. Having these documents readily accessible is crucial for their peace of mind.
Key estate planning documents every family should have
When we begin the estate planning process, we focus on four key documents that every legal adult in the household should have:
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Durable power of attorney: This document allows a designated person to make financial decisions on behalf of the client if they become incapacitated. It’s essential for ensuring that someone trustworthy can manage their finances when they are unable to do so.
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Advanced medical healthcare directives: Also known as a living will, this document specifies the client’s wishes regarding medical treatment in case they are unable to communicate those decisions themselves. It’s a critical document for ensuring that their healthcare preferences are respected.
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Last will and testament: This document outlines how the client’s assets will be distributed upon their death. It’s the cornerstone of any estate plan, ensuring that their wishes are carried out and that their loved ones are taken care of.
- Living trust (optional): For some clients, a living trust may be advisable. It can help avoid probate, manage assets during their lifetime, and ensure a smooth transition of wealth to their beneficiaries.
Reviewing estate planning documents: What financial advisors should look for
Once the estate planning documents are in place, our financial advisors review them in detail to ensure everything is in order. Here’s a checklist of what we look for:
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Consistency with retirement accounts: We verify that the estate planning documents align with the client’s retirement accounts, ensuring that beneficiary designations are up to date and reflect their current wishes.
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Tax implications: We assess the potential tax implications of the estate plan, advising clients on strategies to minimize tax liabilities for their heirs.
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Asset allocation: We review the client’s asset allocation to ensure it’s consistent with their estate plan and that it supports their long-term financial goals.
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Beneficiary designations: We conduct a thorough beneficiary review, checking every account and policy that requires an asset to transfer by title. This includes retirement accounts, life insurance policies, and other financial instruments.
The importance of regular reviews and updates
Estate planning is not a one-time event. Regular reviews and updates are required to ensure that the information is aligned with the client’s current situation. At Shilanski & Associates, we review our clients’ estate plans every two years, typically during our fall surge. This timing is intentional, as it often coincides with family gatherings during the holidays – a time when clients may wish to make changes based on recent family interactions.
Ricky’s legacy: A catalyst for change
The loss of my Uncle Ricky left a void that can never be filled. But his story serves as a powerful reminder of why estate planning is so crucial. We all know someone who has passed away without their affairs in order. As financial advisors, we have a responsibility to ensure that this doesn’t happen to our clients.
By taking the time to address estate planning early in the financial planning process, we can help our clients protect their families and preserve their legacy. It’s not just about building wealth; it’s about ensuring that wealth is passed on according to their wishes, providing for the people they love.
Micah Shilanski, CFP®, is a financial planner who achieves the impossible. Micah is recognized as a leader in the concept of lifestyle design for financial planners and has spoken at conferences across the country. Micah is an advisor with Shilanski and Associates, a founder of Plan Your Federal Retirement, and a co-founder of The Perfect RIA.
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