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Ric Edelman To Advisors: Have the Death Talk with Clients Now

By Rita Raagas De Ramos December 20, 2018

Financial advisor Ric Edelman says advisors should steer their clients into having that often-uncomfortable talk about what they want to do with their assets upon their death.

“That’s critical for targeted financial planning and efficient estate planning, and it avoids problems that may arise when individuals come out of the woodwork to make claims against the estate and the assets,” says the Fairfax, Va.-based founder and executive chairman of Edelman Financial Services.

Edelman says clients often don’t examine their estate planning needs correctly.

“They either have never done it, haven’t done it recently, or have done it but ineffectively without realizing it because they haven’t effectively anticipated long-term care costs or the actual costs of retirement living,” Edelman says.

“Many people assume their costs will go down in retirement. In our experience that’s not the case. Our typical client spends as much money in retirement as they did prior to retirement. They spend it differently, but they don’t spend less,” he adds.

Edelman says most people want to maintain their current lifestyle upon retirement so the critical question for advisors to help clients answer is whether they have the financial resources to achieve that.

Many clients avoid estate planning as long as they can, but avoiding the topic leads to problems after the principal client’s death, such as family fights and individuals who feel they didn’t receive their fair share, according to Edelman.

“Many people don’t want to deal with estate planning because it’s a contemplation of your death, and that’s not a fun subject. Another reason is that people don’t want to admit their true feelings for their family members,” Edelman says.

“Parents are insistent in most cases, in my experience, in having the children believe that they love their children equally, but in fact they almost never do. But even if they love their children equally, they might not be so fond of one child’s husband or in-laws,” he adds.

Edelman says other factors come into play when determining the passing on of wealth to children, and there’s never a one-size-fits all answer.

“Perhaps you have one child who’s a highly-paid executive and another who’s a low-paid school teacher. Should they get equal amounts of inheritance when their needs are different? What if one child has a special-needs child? What if one child took out a lot of loans? What if one child is divorced? What if one child has four children and the other child has none?” Edelman asks, citing examples of potential variables.

“It’s because life isn’t fair and nothing is ever equal that it’s very difficult for parents to make the decision of who gets the money,” he adds.

Ric Edelman

Edelman says his firm’s advisors conduct “extensive conversations” with clients about estate planning.

The firm looks at estate planning from two perspectives, he says. The first is the management of the clients’ assets while they’re alive, including during any periods of incapacity or diminished capacity. The second is the distribution of the clients’ assets following their deaths.

“By engaging them in these conversations and the implications of inaction, it often prods them to engage proactively in the estate planning process,” Edelman says.

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Tags:  Client retention , Retirement planning , Tax planning , Estate planning , Behavioral finance , Edelman Financial Services

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