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Financial Planning > Trusts and Estates > Estate Planning

3 Estate Planning Strategies for Advisors, Clients and Heirs

By David Haughton

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What You Need to Know

  • Observers of Day of the Dead celebrate deceased loved ones with joyous remembrances.
  • Finance-related tasks can distract from honoring the person’s life, making it important to get holdings in order.
  • Avoiding probate, mitigating taxes and organizing information are among the priorities to support heirs.

Day of the Dead (Dia de los Muertos) is a festive occasion where deceased loved ones are honored and celebrated. In stark contrast to how some people see the solemn events surrounding those who have passed, those celebrating the Day of the Dead have joyous remembrances of the departed.

There are often finance-related tasks associated with a death that distract from honoring the person’s life. To ensure that their loved ones can focus on celebrating their memory, clients should endeavor to have a well-planned estate.

If heirs are left with a messy estate to clean up, it will likely result in a lot of wasted time, attention and unnecessary expense. Additionally, strife among family members can erupt if an estate lacks a clear and identifiable plan for who gets what and how.

Luckily, these obstacles can be avoided with proper planning. There are several actions you can take to help your clients leave a legacy that can be celebrated by their heirs.

Help Them Avoid Probate

Probate is the legal process of transferring title ownership of a decedent’s assets to their heirs. The probate process involves the court system and can be costly as well as time consuming. Also, because probate is a public process, anyone’s prying eyes can see documents that are filed and learn details such as what assets comprise the estate and who the beneficiaries are.

Many family squabbles take place during, and as a result of, probate. Assisting clients to make sure the hard-earned wealth acquired over their lifetime passes free of the probate process can help establish smooth and timely transition of assets to the next generation.

How do you avoid probate? By setting assets up to transfer automatically by operation of law through joint tenancy with rights of survivorship, beneficiary designation (or transfer on death), or a properly funded trust.

It’s important to note that having a last will and testament does not necessarily prevent probate. A will is simply a set of instructions to the probate court judge as to who is in charge and where the assets should end up.

As even one asset in a client’s name that lacks a beneficiary designation could potentially cause a full-blown probate, it’s critical to conduct an asset-by-asset review with a client to confirm that all assets are appropriately accounted for. 

Assist With Tax Mitigation

There are a few ways the beneficiary directly or indirectly bears the costs of taxation of a person’s assets at death.

One way is through estate taxes. Right now, the estate tax threshold is the highest it has ever been at $12.92 million per person (doubled for married couples), so the pool of clients who face a federal estate tax issue is smaller than ever. The estate tax exemption, however, is expected to be cut in half due to the sunset of the increased estate tax exemption provision of the Tax Cuts and Jobs Act in 2026.

In addition, many states have a state estate tax, which applies to their residents as well as nonresidents who die owning property in the state. State estate tax thresholds are typically much lower than the federal exemption.

There are various methods to reduce or eliminate an estate tax liability, but all these planning strategies need to be employed during a person’s lifetime. For example, engaging in gifting strategies that leverage the gift tax annual exclusion (currently $17,000 per person) can reduce a person’s taxable estate at death.

For married couples, ensuring that the clients have an available credit shelter trust to be funded at the death of the first spouse can aid in “capturing” the decedent’s estate tax exemption and permit the assets to grow outside the estate of the surviving spouse. 

This type of planning doesn’t need to be rigid and complex; there are flexible ways to give clients the option to employ strategies to mitigate taxes at the time of death depending on the estate tax laws at that time, such as using a disclaimer trust. What’s critical is that clients have the proper documentation in place prior to death to accomplish this type of approach. Directing a client to visit a local estate planning attorney can help them pass the maximum amount of wealth to the next generation.

Encourage Organized, Accessible Information

It can be incredibly frustrating trying to figure out what someone owns after they die if they weren’t organized. Then, once all the assets are identified, the issue becomes how to access them. Privacy laws can block a loved one’s access to key information and, in an increasingly digital world, people usually have a litany of online accounts they access daily.

Ensure that clients have provided their heirs with a comprehensive list of all assets and how to access them. This will make next steps much easier for your client’s heirs and help them move past the financial aspects of death to focus instead on honoring their life.

By supporting your clients in crafting a good estate plan, you not only give them peace of mind that their affairs are taken care of, you also enable their heirs to focus on what’s most important — celebrating the legacy of their loved one.

David Haughton is team lead and an advanced planning consultant at Commonwealth Financial Network, Member FINRA/SIPC, and provides estate, trust, charitable, education, business, and Social Security planning support to Commonwealth’s affiliated advisors.

Image: Chris Nicholls/ALM

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