When you look for a financial planner, there are six important questions you should ask BEFORE you hire the financial planner or invest in any products the planner recommends:1. What are your credentials to be a financial planner?2. Have you earned any degrees or certifications?3. How many years have you worked as a financial planner?4. How are you compensated for the financial advice you provide? Are you a Fee-Only financial advisor?
5. Are you paid any performance bonuses, commissions, or other form of compensation based upon the amount of mutual funds, stocks, annuities, insurance policies, or other financial products you sell; and 6. How frequently will I be able to speak with you about my financial plan and accounts?Based on how the financial planner answers these questions, you should have a better understanding of whether the advisor has the necessary experience and education to meet your needs.It is also important to determine whether the financial planner will try to sell you stocks, bonds, annuities, mutual funds or other investment products to earn commissions. If so, is the advisor compensated in a way that allows you to receive impartial advice that is in your best interest? Far too many people end up in annuities, mutual funds, and life insurance products that cause them to lose money only to find out later their financial advisor was paid a huge commission to sell a specific product.Before contacting a financial planner, organize your financial records. Most financial advisors will ask for the aggregate value of your estate before meeting with you, so using financial planning software will help you calculate an accurate amount. If you are going to be charged a fee to manage your investments based on the value of your account, having this information will be useful in calculating how much you can expect to pay for financial management.For a detailed overview of how to select and hire a qualified financial advisor in your area, go to our find a financial planner page.
10 Estate Planning Issues to Discuss With Your Financial Advisor in 2020
1. The amount you need to save to pay your living expenses and medical bills in retirement. A financial planner can help you create an income plan for retirement and assist you in planning for major expenses in retirement such as health care. If your goal is to leave an inheritance for your children, any dependents, charities or other beneficiaries, this process will help you determine how much you may be able to leave in your estate plan.2. The amount you need to save to pay for long term care expenses and whether long term care insurance should be part of your financial plan. If you have a spouse or partner and want to make sure they will have financial security in spite of any nursing home costs, purchasing long term care insurance may be something you want to evaluate with the assistance of a financial advisor.3. The amount and type of life insurance you need to provide for your spouse, children, and other dependents. Life insurance policies and life insurance trusts can be used in a myriad of ways to accomplish various estate planning objectives. Due to the sophisticated nature of these techniques, discussing your options with a financial advisor is usually helpful.4. The amount of short and long term disability insurance you need to pay your living expenses in the event of injury or chronic illness. This type of insurance may be evaluated with regard to your overall estate plan to determine how your goals would be affected by a loss of income from employment.5. How to add beneficiary and pay on death account designations to your retirement, brokerage, and bank accounts that are consistent with your estate plan. As a result of passage of The Secure Act at the end of 2019, it is important to consult a financial planner about whether your beneficiary designations on retirement plan accounts and IRA's should be modified due to recent legislative changes in the U.S.6. Whether a strategy of gifts and gifting to your children and other heirs could reduce estate, gift or generation skipping transfer taxes on your estate. A financial planner can explain how the current lifetime exclusion amount and 2020 gifting limits can be used to your advantage when planning your estate.7. Whether creating a separate fund for charitable giving such as a charitable gift account would reduce your income taxes or estate taxes and allow you to support your church, favorite charities, or alma mater.
With so many people being affected by job losses as a result of the coronavirus pandemic, you may want to explore charitable giving options to contribute to a cause you support. A financial planner can also explain your options for charitable giving from other types of accounts such as IRA's.8. The amount you can contribute annually to an IRA to reduce your income taxes. If you are between the ages of 70 to 72 or older, you may also want to ask a financial advisor about the required minimum distribution amount or RMD you need to begin withdrawing from your IRA annually. If you have not spoken to a financial advisor since The Secure Act became law, consult a financial advisor about any required changes to your RMD's and related issues that may impact distributions from your retirement plan accounts or IRA's.9. What changes to your investment allocation may be more suitable to your current risk tolerance, investment experience, and desired financial goals. For example, stock market volatility escalated during the first quarter of 2020. This is generally a good time to keep in touch with a financial advisor to ensure your portfolio is properly positioned to your preferences.10. How to develop an income plan based on your income and expenses that provides you options to cover any shortfalls in your income during retirement. A financial advisor may be able to help you find additional sources of income, change your investment mix to increase income, identify annuities that could provide income, etc. You may also want to ask for advice on how the income of your surviving spouse or any dependents will be impacted by any changes you make.Before contacting a financial planner, you may also want to review our section on
IRA’s and Your Estate Plan for tips and suggestions on related financial planning topics.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated April 3, 2020.
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