Topic: Confidentiality of Financial Documents

ESTATE PLANNING: WHY DO I NEED TO DISCLOSE MY FINANCIAL INFORMATION TO MY LAWYER

By Milton Babirak, JD, LLM      |      Babirak Carr, PC     |     Sterling, VA

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When you employ an estate planning lawyer to prepare your estate plan, that lawyer will ask you for lots of confidential financial information. That lawyer will give you an initial questionnaire to fill out and they will ask you for a copy of your financial documents, such as your: house deed, previous estate plan, income tax return, any prenuptial agreement, monthly statements for bank accounts and investment accounts, retirement and pension accounts, declaration pages for your life insurance, all of your beneficiary designations, etc.

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But why does a lawyer need all this? For most people, it’s a lot of work to complete the questionnaire and identify and assemble these documents. Also, most people consider this information to be very personal and private. Besides, most people have a fairly straightforward plan in mind; they just want to give everything to their spouse and then to their kids. Why does a lawyer need to see all these documents when the plan itself is so simple?

 

There are three main reasons why an estate planning lawyer needs to review your financial documents: To know: (1) what you own; (2) the value of what you own; and (3) how each asset is titled.

 

If you do not tell your lawyer what you own, he or she won’t know you have it and cannot plan for its distribution on your death. Further, some types of assets are handled differently than others. Qualified retirement accounts get different treatment than some other assets. So does real estate. It is also essential to determine the value of your assets. Lawyers will recommend different types of estate plans depending on the value of your assets. But most importantly, your lawyer needs to see how your assets are titled. Your house and perhaps some bank accounts may be titled jointly. Other assets may be owned by you but have designated beneficiaries. Retirement accounts and life insurance policies have designated beneficiaries. For these assets, they pass immediately by operation of law to your designated beneficiaries-no matter what your estate plan says. Your lawyer may need to advise you to change beneficiary designations to properly fund your estate plan-or not.

 

It may give you some comfort to know that your lawyer has an affirmative duty to keep your information confidential.