Financial Planning

Navigating estate planning and trusts

By: Grant Field, Chief Executive Officer, FedGroup

Estate planning and trust environments are highly specialised and technical – both from a legal and tax perspective.

As such, financial planners with the standard CFP® qualification lack the expertise needed to competently manage every aspect of a client’s portfolio in this regard, in much the same way that an estate planner may lack the skills to offer competent financial planning advice.

This is especially noticeable as complexity increases. Additionally, the question arises of whether a financial planner is legally qualified to perform estate planning that requires more than the simple off-the-shelf will. For complex estates, planning is inherently more technical and legally strenuous. In such cases, specialists would be better positioned to execute on these specific requirements.

A financial planner advises on the correct investment vehicles offered by institutional providers, but does not personally execute the portfolio structure or conduct the share trades. In much the same way, the planner should facilitate estate planning and trusts whilst leaving the technical aspects to an expert. This requires an understanding of the product landscape and certain technical requirements to advise on the need for more complex estate planning, but shouldn’t entail any actual execution.

Execution is best outsourced to institutional providers who have created specialised products and have the technical competencies and expertise. Such professionals would include qualified attorneys who can offer the appropriate legal advice, and tax specialists, who can set up a will or trust structure that both complies with regulatory frameworks and offers the best benefit to the client.

FedGroup, for example, has a full fiduciary services department that can draw up simple or complex wills, provide estate planning advice, and manage the execution of estates. It can also set up trust structures and related documentation to help with all the associated, and onerous, administrative requirements.

The value of entrusting estate planning and administration to those who are best qualified to ensure a simple and smooth transfer of assets to the intended recipients is self-evident. The increased stress placed on family members when an individual dies intestate, particularly when that person was a primary breadwinner, can be crippling. In these instances, surviving family members have no say over how assets and capital are allocated.

It’s understandable that discussing death is uncomfortable, but if investors are content to pay for financial advice on relatively small investment decisions, they should absolutely follow the same approach with regards to what happens to their entire life’s savings. This is particularly relevant for business owners or shareholders, who need to ensure their estate is properly structured. In these instances, issues of tax and the transfer of shares can become enormously complex.

Ultimately, there is a limit to the type of estate planning that financial planners can, and should, provide. The threshold of what financial planners can execute is far lower. This task probably shouldn’t fall to a bank either (while banks are increasingly providing free wills to clients, this is not their core business). Also, while they may have the in-house expertise, there will always be questions around conflicts of interest regarding loans on assets in an individual’s estate.

Therefore, a financial planner’s primary role in estate planning and trusts is to firstly deliberate and advise on the need for more complex planning, and then coordinate and manage a team of experts and specialist providers that can deliver on these specialised requirements.

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