Do I Need a Financial Planner for Estate Planning?
If you are making an estate plan, you will need an estate planning lawyer. However, you may also benefit from meeting with a financial planner about your estate. Due to recent legislation passed in the U.S. such as The Secure Act, many different aspects of your estate plan may need to be updated or revised. There are several ways a financial planner can help with your estate plan, including the following:1. Determine whether you need to purchase life insurance to achieve your estate planning goals.
2. Evaluate different types of life insurance policies, such as term and whole life, as well as whether you can afford the premiums.
Determine whether you should use annuities as part of your estate plan. For example, annuities may be used as part of income planning when you are in or approaching retirement.4. Evaluate the advantages and disadvantages of different types of annuities, such as variable, fixed, and charitable gift annuities, compared with your income needs and estate planning objectives.5. Understand the amount of inheritance your heirs may receive from any pensions, IRAs, 401Ks, and other retirement accounts you own, as well as the tax consequences of payouts received from each type of plan.6. Assist in adding pay on death account beneficiary designations to your bank, retirement, and investment accounts to ensure these assets avoid probate and pass to your desired beneficiaries. Also, due to recent changes in rules applicable to retirement plan accounts and IRA's for example, you may want to modify beneficiary designations or review your plans for leaving an inheritance to various individuals from these types of accounts.7. Determine whether you need to purchase
long term care insurance to ensure you have enough assets for your surviving spouse, partner or children even if you incur substantial expenses for nursing home care or related types of care.
How to Find a Financial Planner
When choosing a financial planner, it may be best to look for a Fee Only financial planner in your community that is independent and not affiliated with a brokerage or insurance company, depending on your preferences. You want to find a financial planner that can make recommendations solely in your best interest without being influenced by receiving a commission or other compensation for selling you a product, such as insurance, annuities or mutual funds. If you are interested in choosing the best investments for your situation rather than being sold investments for which your financial advisor will receive the most compensation, be diligent in asking questions about how the advisor or planner gets paid.If a financial adviser has this type of conflict of interest, the adviser should disclose it to you before you purchase any product or service. To find an independent, Fee Only financial planner, a good resource is the National Association of Personal Financial Advisors.
Why You Need a Financial Planner If You Receive an Inheritance
If you inherit money or property after the death of a loved one, you may want to consider meeting with a financial planner before making any big decisions on what to do with it. There are several reasons you may benefit from talking with a financial planner, including:
1. This may be the only inheritance you receive in your lifetime. If the sum is large enough, it could provide financial security you will need to rely on later in life. Unless you are an experienced financial professional or investor, you may not have the information necessary to develop a plan to manage the inheritance.2. If your inheritance includes IRAs, 401Ks, or other retirement accounts, there are withdrawal deadlines and tax issues you should discuss with a financial planner to avoid paying penalties and fees. If you do not have a good understanding of the rules applicable to inherited retirement accounts or fail to act quickly to make the necessary decisions related to inherited accounts, you may lose part of your inheritance. See Inherited IRA Rules.3. If your inheritance includes stocks, bonds, ETF’s, mutual funds, rental property, ownership in a privately held business or other investments, a financial planner can provide valuable advice on a number of issues, including income planning, tax implications, valuation, and risk of loss. If you want to grow your inheritance, receive a lifetime income stream or achieve a particular goal with it, you can benefit from meeting with a financial planner.
Financial Planner vs. Financial Adviser
If you need help deciding what to do with your inheritance or making an estate plan, it is essential to understand the difference between a financial planner and a financial adviser. You may want to meet with a financial planner that is paid solely for providing financial advice if your goal is to avoid meeting with a financial adviser that is paid to sell you investment products, such as mutual funds, annuities, insurance, and investment management services. Many people do not know they have a choice in the type of financial adviser they select.Be aware that banks, brokerage firms, and the companies that hold your 401k and IRA account sometimes employ financial advisers that are either paid or offered incentives to sell you investment products that may have substantial risk of loss, high fees or may not be in your best interest. One option is to find an independent financial planner that you pay hourly or a flat fee for professional financial advice that does not involve the sale of any particular investment product. To learn more about taking control of your investments, retirement plans, and your estate, review our list of
IRA, 401k, and Annuity Books.
Preparing to Meet a Financial Planner
Before contacting a financial planner, make a list of issues you want to discuss and the reasons you need a consultation. If you communicate your concerns clearly to the financial planner, he or she can better determine whether they offer the type of services you need.
For a list of important questions to ask your financial planner, visit our financial planning page. Many financial planners will ask the total dollar amount of your investable assets. Use financial planning software to create an organized summary of your assets and income before you meet with a financial planner. This is also important because you may be asked to pay management fees or other types of fees based on the value or amount of your investments.
Beware of Free Financial Advice
When looking for a financial planner, you may want to be cautious about free financial guidance offered by certain banks, brokerage firms, and retirement plan companies, such as the administrator of your 401K or IRA. Unfortunately, some financial advisers employed at these types of companies may offer free advice, but are often paid high commissions, bonuses or other incentives to sell annuities, mutual funds, managed investments, and other products. Of course, this is not always the case. But to avoid getting into investments you may later regret, it is generally a good practice to carefully vet the advisor and thoroughly review all paperwork, forms, disclosures, contracts, policies, etc. associated with the advisor, firm, and investment.If your goal is to get help with estate planning strategy or advice on how to invest your inheritance, an independent, Fee Only financial planner may be a better choice than getting so called free advice from someone employed by a bank, brokerage firm or retirement plan administrator who wants to sell a specific financial product.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated March 11, 2020.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
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