February 28, 2023 – A recent survey found that only one in three Americans has a will—a number that has barely budged over the past few years, even during the COVID-19 pandemic. Among people who don’t have a will, the top reason was that they “haven’t gotten around to it.”¹

As a financial professional, these numbers should set off alarm bells. In part, that’s because death isn’t an “if” but a “when.” Dying without the proper documents in place means a much more complicated process for the people left behind, with both emotional and financial implications. More important, estate planning is only one type of life crisis that clients need to think through and plan for. Others include serious accidents, becoming incapacitated, or the death of a loved one. And the best time to have those conversations is before a crisis happens.

Helping your clients push through some discomfort and talk about these situations can dramatically reduce the financial and emotional fallout after they happen.

Here are some basic guidelines for the process:

Start by asking questions and keeping it light. Some clients may not even want to start a conversation about these kinds of challenging topics. You can gently nudge them by asking some key questions. One potential entry point is when putting together a retirement plan. A key entering argument for that process is estimating how long a client plans to live, which can segue into questions about health conditions, family medical histories, whether clients have an estate plan in place and whether they’ve considered other types of life crises.

Stipulate who can make decisions—and under which conditions. Having a partnership with a trusted attorney is beneficial to your clients who need a referral to someone who can draw up their legal documents. In addition to a will that clarifies how financial assets should be distributed, an attorney can also help them think through situations in which they’re alive but incapacitated. There are several documents that serve different purposes. A living will documents a person’s wishes for preset situations like whether they want to be resuscitated, end-of-life care, and how they want their remains to be handled. A healthcare proxy (also known as a healthcare power of attorney) designates another person to make medical decisions on their behalf—for example, choosing between different options regarding care. And a power-of-attorney allows another person to make other decisions, like selling assets or opening and closing financial accounts. Powers-of-attorney can be set up so that they only take effect under predefined conditions—i.e., when people can no longer make decisions for themselves.

Determine how insurance factors into the mix. Insurance is another critical part of planning for unexpected events in your clients’ lives. Depending on how financially sophisticated they are, you may need to explain some of the basics—like the difference between term life insurance (which provides coverage for a set period, typically just during their working lives) and permanent life insurance (which covers a person during their entire life). Disability insurance can replace income lost while a person is unable to work, either short-term or long-term. It’s often provided as part of employee benefits packages, but entrepreneurs or self-employed people may be running a risk if they don’t carry some type of disability policy. And long-term care insurance can pay for the expenses incurred when aging people can no longer live independently and need more hands-on care and oversight. If your practice does not offer these services, refer your clients to a respected insurance agent who can help fill in the gaps as needed.

Address the financial aspects of estate planning. Because wills and other components of an estate plan are legal documents, they need to be drawn up by a lawyer. But there are financial aspects that you can help clients sort through before they start that process. For example, you can talk through how clients want to divide up their assets in the estate plan, and whether they have any specific goals or objectives—for example, supporting a charitable cause or setting up 529 accounts for grandchildren.

Creating a personal plan for emergencies. Some clients like to have a documented plan in place for loved ones to follow. That plan clarifies where their important documents are located, how to access some cash to cover basic bills in the short term, who should be notified, and any other steps that need to happen. They can share that plan with their spouse, a grown child, or the person they’ve designated as executor of their will.

Put all the paperwork in one place. A key part of an emergency plan should be to clarify where important documents are located. That includes birth certificates, Social Security cards, wedding licenses, life insurance policies, property deeds and other important legal documents. These should be in one place (safely stored, if they’re originals), with a spouse, significant other or a trusted person knowing where they are.

Don’t forget about digital assets. As people’s lives have become digitized, their digital assets carry far greater importance. The laws for how these assets get handled vary from state to state. But your clients need to think about how they get handled. Every phone, laptop, tablet, bank account, subscription, and other products and services must be part of the discussion (along with all related passwords). Some people use password managers, which keep all information in a digital vault and only require a single master password.

Encourage clients to talk with other family members. These conversations shouldn’t be with you alone. Clients should also talk with relevant people in their life so that there are no surprises. Regarding a healthcare proxy, for example, the person tasked with making these decisions should know about it in advance and have a decent sense of your client’s wishes. Regarding a will, for example, the executor should know their role in advance, and heirs should have a sense of what they’re going to inherit—even if only in broad terms. When people have misperceptions about things like this, it can lead to animosity and make a crisis much more challenging.

Review and revise over time. Last, these conversations shouldn’t be a one-time event. Rather, they should recur over time, particularly as clients get older. Some financial professionals use a checklist to cover the entire process, and they build it into annual financial check-ups. Thinking through these issues for the first time—and amassing all the documentation—is challenging, but making minor adjustments to those plans over time can be a lot simpler.

Clients wouldn’t have to think about these topics in a perfect world. In the real world, they do.