Integrated Estate Planning: A Win-Win for Both Clients and Wealth Managers

The concept of wealth management is an interesting proposition.  A recent study by CEG Worldwide concluded that only 6 percent of those holding themselves out as wealth managers actually provided comprehensive wealth management services, with the remaining 94 percent simply being product salesmen.

True comprehensive wealth management involves various areas of a client’s financial affairs, including investments, risk management and estate planning.  Recent surveys have shown an increasing public interest in asset protection, especially among professionals and high net worth individuals.

The concept of integrated estate planning has grown substantially over the past few years.  Integrated estate planning refers to the integration of estate planning and asset protection strategies. 

For RIAs, estate planners and other fiduciaries, integrated estate planning offers the opportunity to create a true win-win situation, an opportunity to enhance one’s practice while also addressing potential liability issues.  The potential malpractice issues for failing to incorporate asset protection considerations into estate planning are being discussed more and more at conferences and in professional publications.

Non-attorneys who claim to offer comprehensive wealth management offer counter that they do not feel experienced enough to offer advice on asset protection strategies or that they do not feel comfortable doing so for fear of violating the unauthorized practice of law rules.  While both are legitimate concerns, neither prevents a non-attorney from generally discussing the issue with a client and referring a client to an attorney for more details and possible implementation.  Failure to do so may be grounds for a malpractice action against an adviser publicly holding themselves out as comprehensive wealth managers.

One common misconception among both the public and financial advisers is that assert protection is expensive and requires an off-shore trust.  While asset protection can be expensive and the most effective option may be an off-shore trust, there are a number of simple, relatively inexpensive, and effective asset protection strategies available, including various types of trusts and wealth transfer strategies.

One type of trust that has been increasingly popular is the so-called “income only” trust (“IOT”).  Often referred to as the “middle-income asset protection plan,” this type of trust is often used in connection with Medicaid planning since it can effectively remove assets from one’s estate, allowing one to qualify for government benefits, while still providing a source of income for needs not covered by government benefits.

In considering asset protection strategies, RIAs, estate planners and other fiduciaries must always stress two important points to clients.  First, asset protection is neither intended to, nor does, provide protection for fraudulent schemes.  Advisers should always take steps to ensure that a client is not interested in asset protection to engage in fraudulent activity. 

Second, the amount of protection provided by asset protection strategies is inversely proportionate to the amount of control given up by a client over the assets involved.  The more control a client retains over the subject assets, the less protection an asset protection strategy will likely provide.  “Control” includes such powers as ability to switch beneficiaries, ability to use assets for personal use, and ability to terminate an asset protection strategy. 

Integrated estate planning offers yet another benefit to RIAs and other financial fiduciaries.  Since implementation of asset protection strategies will generally require an attorney to draft the documentation required to implement many asset protection strategies, integrated estate planning provided a networking opportunity for both the RIA and the estate planning attorney.  

About jwatkins

I am a securities and ERISA attorney. I am a CFP Board Emeritus™ member and an Accredited Wealth Management Advisor™. I am a 1977 graduate of Georgia State University and a 1981 graduate of the University of Notre Dame Law School. I am the author of "CommonSense InvestSense: The Power of the Informed Investor" and " The 401(k)/403(b) Investment Manual: What Plan Sponsors and Plan Participants REALLY Need To Know. " As a former compliance director, I have extensive experience in evaluating the legal prudence of various types of investments, including mutual funds and annuities. My goal is to combine my legal and compliance experience in order to help educate investors on sound, proven investment strategies that will help them protect their financial security.
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