By John H. Robinson, September 2022

Every year, I write at least an article or two aimed at dispelling the myths that estate planning exists solely in the realm of attorneys and that the estate planning process begins and ends with the drafting of legal documents such as trusts, wills, durable powers of attorney, and advance health care directives. [See also: Estate Planning – Perception vs.  Implementation] Fortunately for Fee-Only Planning Hawaii and Financial Planning Hawaii, my efforts to change this consumer predisposition are largely quixotic. Estate planning oversights and faux-pas continue to be low hanging fruit for financial planners like me to showcase quantifiable value beyond just portfolio management and investing. Examples of the types of estate planning mistakes clients make are limitless and are regular fodder in our client newsletter. A recent experience with a client and his attorney provided the inspiration for this article. 

Like many clients who joined me in the 1990s before I fully transitioned my practice model from portfolio management to comprehensive financial planning, “Bill” (fake name for client confidentiality) had been a little bit a little bit slow to get around to sharing his estate planning documents, but, after only a couple of decades of prodding, he finally relented and uploaded his documents to the eMoney vault earlier this year for me to review.  The documents consisted of a simple will, durable power of attorney, and Massachusetts health care proxy.  The documents were drafted in 2004 by an attorney friend of Bill’s who had also drafted his business documents and had helped with some local zoning and permitting issues for his business.   Having reviewed scores of these documents from clients in many different states, the documents seemed like they were boiler plate templates a la Legal Zoom or similar service and several common supplementary health care documents common in Massachusetts estate plans (e.g., living will) were missing .  A quick read revealed that the people Bill had named in 2004 to serve as his personal representative, attorney-in-fact, and health care proxy (Bill’s ex-wife and his deceased brother) were decidedly inconsistent with his current wishes. Additionally, Bill’s two sons, who were minors at the time the documents were drafted, are now responsible adults who help Bill run his company.  He has complete trust and confidence in both sons, and they all get along and communicate very well.

Bill asked me to reach out to his attorney to update the documents.  However, when I made the introduction and suggested the need for a review, the attorney responded that the documents are perfectly valid and there was no need to update them.  I cannot think of a response that better amplifies the critical role financial planners can play in estate planning than this one.  To me, it was obvious that the attorney was simply too busy, and that estate planning was not his most profitable line of business nor was it his forte.

Beyond the glaringly obvious problems problems and gaps in his existing documents, Bill also owns a lake house in Connecticut, a home in Florida, a large sea-going sailboat which is registered in Delaware and owned by an LLC,  his business property and home in Massachusetts, and his business, which was structured as an LLC. To my thinking, if Bill were to become incapacitated or die, his current estate plan would be an utter disaster.  To solve this problem, we put Bill in touch with a Massachusetts estate planning attorney who prepared a revocable living trust naming Bill’s two adult sons as co-trustees, a new durable power of attorney listing the as co-attorneys-in-fact for his financial matters if he becomes incapacitated, and a full suite of MA healthcare documents including a new MA Health Care proxy and Living Will.  The attorney then drafted quitclaim deeds to change the registration of all of the real estate holdings from Bill’s name into his revocable trust.  He also updated the LLCs for the boat and his business so that the ownership interests of these legal entities are now in the name of is revocable trust as well.  The registrations of Bill’s major bank and and investment accounts have also been updated to his trust.  All of the estate planning documents, LLCs and deeds are now safely ensconced in Bill’s eMoney vault and Bill’s two sons are both aware of their roles if their dad becomes incapacitated or dies and know that we are available to help them navigate that difficult period. 

As you can see, estate planning is so much more than just drafting documents and the financial planner’s role in planning and implementation is often invaluable.

John H. Robinson is the owner/founder of Financial Planning Hawaii, Fee-Only Planning Hawaii, and Paraplanning Hawaii.  He is also a co-founder of fintech software-maker Nest Egg Guru.

DISCLOSURES

Fee-only financial planning services are provided through Financial Planning Hawaii, Inc. DBA Fee-Only Planning Hawaii, a separate state of Hawaii Registered Investment Advisory firm. Financial Planning Hawaii does not take custody of client assets nor do its advisers take discretionary authority over client accounts.

The information contained herein is general in nature. Neither Fee-Only Hawaii, Financial Planning Hawaii, nor J.W. Cole provides client-specific tax or legal advice. All readers should consult with their tax and/or legal advisors for such guidance in advance of making investment or financial planning decisions with tax or legal implications