Don’t Wait, Communicate (In Writing)

As an advisor, I often meet with clients who are building, or have managed to build, an adequate investment portfolio to meet their retirement and other objectives. Of course, like many people, they regularly monitor their portfolio performance and want to talk about how the ups and downs of the market may impact their financial goals .

However, while conversations regarding portfolios are expected and occur regularly, I sometimes I find that clients can overlook other details regarding their accounts. For example, the title on the account and the listed beneficiary designations can be just as important, especially when the time comes for your estate plan to distribute your assets according to your instructions. If you just said, “What estate plan?” I encourage you to read further.

Several years ago, I babysat for my nieces and nephews while my sister and brother in law were out of town for a couple of days. As many concerned mothers often do, she left me four pages of notes regarding their care. Among the directions was information limiting television viewing hours, a warning regarding getting pull-ups on the youngest by 7:00 PM, the suggested number of minutes for “time out,” and even our own mother’s phone number… just in case I didn’t already have it. Upon their return, I asked my sister if I could review their estate plan, but she said they did not have one. The irony amused me. She had left four pages of instructions regarding their children’s care while they were gone only a few days, but had not left any instructions in the event they were gone much, much longer.

I took the opportunity to shed some light on estate planning. As you would probably expect when working with family, there were some eye rolls and sighs at first. However, they soon began to see the importance of documenting their wishes for her kids, as well as their financial assets. In a nutshell, that’s the purpose of an estate plan. Soon thereafter they decided to see an estate planning attorney to formalize their instructions in writing.

So what does this have to do with your investment portfolio? Everything! It’s important that your advisor understands both the short and long-term goals for your assets. This drives the target asset allocation and helps determine possible income needs. Understanding your estate plan helps ensure that the account is titled properly, and that the named beneficiaries are listed appropriately (where applicable). In some cases, clients may have already created a trust, but may have forgotten to place the investment accounts in the trust, potentially resulting in the distribution of those assets in a manner inconsistent with the client’s wishes.

In short, I encourage you to get an estate plan in place, if you haven’t already. Then be sure to review it regularly, modifying it as necessary to ensure it is updated in accordance with your wishes. Finally, make sure that your advisor is aware of your estate plan. Someday it could make a world of difference to your portfolio, and to your heirs.