When designing an estate plan for a new client, I usually ask if the client has a financial “team.” “A team?” you may wonder or say to yourself, “I don’t need a team because I don’t even have an estate! I just need a will, if that.” On the contrary, as mentioned in a previous post, you probably do have an estate and it’s likely larger than you think. So yes, you probably need a team.
Consider this analogy: To maintain overall good physical health, you need a primary doctor, a dentist, and, if you’re female, a gynecologist. Now these providers may only consult with each other once, if then, but they are certainly aware of the other’s existence because your good health requires it. An estate planning team works in a similar way, albeit a little closer, and is essential, especially if you have loved ones you want to protect.
So here’s the line-up:
- Estate planning attorney: Does more than draw up a will or a trust, and while online DIY services offer estate planning, if you use one, be sure there’s a review by an attorney who understands the probate, trust, and tax laws in your state. In addition to the many laws, an estate planning attorney must also have a good command of the various, related documents needed to protect you and your family now and in the future. He or she should also possess, at least, a basic understanding of the federal and state tax implications of the distributions and powers designated within the documents, near-term financial planning, and retirement planning.
- Certified Public Accountant (CPA): Must take a licensing exam, work for as an accountant for about 5 years, and take continuing education courses to retain certification. Accordingly, a CPA’s knowledge base is deeper than a non-certified accountant. A CPA whose specialty is estate and income taxation typically consults with your estate planning attorney to ensure that the tax implications for you and your beneficiaries are minimized.
- Certified Financial Planner (CFP): While not required for CFAs, a CFP must take extensive exams in financial planning, taxes, insurance, estate planning, and retirement. He or she must also take continual financial planning courses to maintain their certification. A CFP performs the research needed to help determine how best to allocate funds to reach your personal goals and the goals of your family and consults with the estate planning attorney to ensure beneficiary designations are accurate and that allocations and distributions are aligned with your goals and unique investment style.
In a nutshell, your estate planning team is a group of capable and highly qualified individuals who, together, help to ensure that:
- The intentions underlying your financial and personal interests are legal and accomplished during and after your lifetime;
- The tax implications of those interests are minimized; and
- The financial interests are secured and grown if possible.
*Note: Different states have different rules on fee-splitting arrangements, but typically attorneys cannot accept fees from non-attorneys, at least in Illinois, which is a healthy check-and-balance on your team.