Vanilla

Jul 08, 2021

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How to prepare for the death of a client

You’ve built a solid financial foundation for your client, made investments with an eye on the future, and helped them strive toward making their financial goals a reality—but what happens once they pass on?

Without preparation, the months following a client’s death can be a chaotic mess for a financial advisor. Assets need to be found, collected, and handed over to whoever is handling the estate. You put in hours of work, and in the end, you are left clientless, watching the assets you carefully tended for your client in life tangled in probate court and wasted on fees and lawyer’s bills.

Handled with care and foresight, the end of a client’s life can be less stressful for you and for their family. As a trusted advisor, you can guide your client to think about the future and prepare their estate to continue to grow and flourish for their loved ones, no matter what happens. Here are the key actions you can take now to help safeguard the future for both you and your clients.

Build a relationship with your client’s family

Few financial advisors meet their client’s spouse or children, so it’s unsurprising that an estimated 65% to 95% of children will not retain their parent’s advisor when they inherit, according to Proactive Advisor Magazine. Building a relationship with the spouse or children of your client can make you a more effective advisor and makes you more likely to retain them if your client passes away.

Conversations surrounding death are challenging and scary for a lot of families. However, avoiding the discussion doesn’t mean it won’t happen. When it does, children are left mourning their parent while simultaneously trying to sort their affairs, often with zero experience managing large assets.

It can be beneficial for financial advisors to facilitate hard conversations with their clients’ families about money, death, and the future. As a trusted third party, you can make talking about end-of-life plans easier and help your client’s children begin to grow their financial literacy. By providing financial advice and education early, you help ensure the eventual inheritors will be knowledgeable and prepared, and in the process, make them significantly more likely to maintain a relationship with you in managing those assets.

Make sure their documents are in order—and up to date

Having your client’s end-of-life documents organized, understood, and up to date sets you up as a vital resource during difficult times. The last thing you want to be doing upon a client’s unexpected passing is sorting through files and folders, searching for needed documents. You can use Vanilla to store and organize documents so they are quick and easy to find—and fully digitized. To learn more, get in touch.

Something as simple as a list of assets, their locations, and how to access them can be incredibly useful to set up (and doesn’t require an attorney). As more digital assets move online, make sure you’re not forgetting to catalog them. Does your client own cryptocurrency? Make sure you have a secure place to store locations and methods of access so these types of assets don’t just evaporate if your client passes unexpectedly.

Revisiting estate planning documents regularly is essential. Family structure, assets, and tax laws are constantly changing, and your client’s documents need to change to reflect that. Out-of-date documents can cause chaos when dividing an inheritance if they don’t reflect the family changes resulting from marriage, divorce, births, and deaths.

You may need a lawyer to help in drawing up the document itself, but financial advisors can be a valuable part of the process. Unlike lawyers hired on for a single document, you see the bigger picture of your client’s finances and hold their confidence. You can contribute by keeping an eye on new assets and major life changes and scheduling updates when needed. This checklist, created by a legal expert, can help you evaluate whether you are up to date for 2021 and facilitate that conversation with your clients.

Know their end-of-life wishes

Even if your client does not have close family inheriting, you play an important role in this part of their life. You are a source of information in assessing your client’s assets for disbursement, and you can keep track of their important end-of-life wishes alongside them.

Know if your client has an advanced directive or living will. Know who has durable power of attorney (and medical power of attorney), as you will likely need to communicate with this person throughout the process. These documents, along with other pieces of the estate plan, will provide vital instructions for their medical wishes, especially if incapacitated, as well as funeral arrangements and desires for the handling of their remains.

If you are keeping electronic documentation for your client, they can even include pre-arranged funeral and burial or cremation plans or write and file a pre-written obituary. Discussing these things in advance and arranging for the relevant information to be stored in an accessible way will make your role much easier when the time comes.

Plan to avoid probate

The worst-case scenario for a disorganized estate is entanglement in a lengthy and expensive probate process. You take professional pride in the assets you tend and grow for your clients, and you don’t want to see them drained and dismantled to pay off lawyers and court fees as your clients’ heirs wait—maybe years—to see any inheritance. You can’t manage assets that are in legal limbo, and you are very unlikely to retain family clients.

Avoiding having conflicting, incomplete, and missing documents will help to safeguard your client’s assets. You are also in a position to avoid this situation by considering end-of-life plans holistically with the financial planning you already provide your clients. LegalZoom outlines the top three ways you can avoid probate: setting up a trust, naming beneficiaries on important accounts, and arranging for property to be held jointly. All of these can be set up during your client’s lifetime as part of your advisement process.

Setting up an effective trust and educating your client’s family about its nuances allows for a seamless transition of assets on the occasion of a client’s death. Your planning and oversight can continue without interruption, empowering you to carry on doing your job and preserving and growing generational wealth for your client and their descendants.

Will you lose a client or continue to look after their financial interests for generations to come?

Financial advisors have a critical role to play when dealing with death and estate planning. You can help a new generation become financially literate adults and long-term clients and make yourself an invaluable resource beyond simple investments or tax season. Effective end-of-life planning is the kindest thing you can offer your clients, lifting a burden from their family during a distressing and trying time.

Vanilla brings the resources you need to estate plan effectively together in one place and helps you communicate to your client and their family in a clear and accessible way. It makes your job easier and makes you a more effective financial advisor while bringing your estate planning processes into the digital age. To learn more, get in touch.

Go beyond financial planning

This article is for educational purposes only and should not be considered legal advice. If you feel that the information in this article is pertinent to your situation, you may wish to consult a qualified attorney for advice tailored to your circumstances.