How to Use the Right Financial Professional — Part 2: Lawyers
By: Lucas Macmillan
Tags: Money Management, Insights, Lawyers, Financial, Canada

In the first part of our mini-series about choosing the right financial professional, we focused on working with accountants. Today, we are going to discuss working with lawyers. Lawyers serve many different purposes, from helping you purchase your first home to making sure your final wishes are preserved, to helping you sell or buy a business. They serve many different roles in your financial life, and selecting the right one affects your success. Throughout this article, we will help you understand how to identify a good lawyer and outline three scenarios where lawyers and financial planners work together to improve your overall financial outcome.

Choosing the right lawyer can be challenging. There are a lot of different choices, so how do you tell the good ones from the bad ones? The first thing to do when reviewing a lawyer is to ensure that they have the correct credentials and have not been disciplined by the Bar Association. We recommend that you also take this one step further and see if they have any additional education or accreditation. Although having more education is not a guarantee that someone is good at what they do, having dedicated time to improving their knowledge demonstrates an ambition and a dedication to their craft that can be taken as a positive sign. Alternatively to education, lawyers can possess a specialization. If you are looking for a lawyer to complete a specific task, then ensuring that they specialize in that area is a good way to increase the likelihood of getting a good result.

Like any advisor that you hire, getting a clear and transparent understanding of their fee structure is crucial to a great experience and a long-term relationship. When choosing a lawyer, this step is very important as you need to ensure that you pick a lawyer that you can afford and trust. It does you no good going bankrupt or becoming resentful because of legal fees. These fees vary significantly from one lawyer to the next and knowing how they are compensated, who else will be compensated for working on your file, and all of the other additional fees that might be incurred throughout the process is important. It is also key to see if the lawyer you are interviewing is upfront about their fees. If you have to pry and dig deeper for a full breakdown, then it may be time to find another lawyer.

We have all heard the saying if it sounds too good to be true, it probably is. But, when it comes to choosing a lawyer, this saying could not be more accurate. If a lawyer offers you promises, guarantees, or insider information, then you need to keep looking. Like anything in life, there are few certainties, and the law (litigation in particular) is one of those areas. Every day lawyers are surprised by Supreme Court decisions, and that ever-changing process makes guarantees and promises an impossible prospect. When selecting a lawyer, keep the above points in mind and use your intuition: if it does not feel right, it probably isn’t.

Now that you have a base knowledge on how to choose a lawyer, let us look at some scenarios where lawyers and financial planners can work together to your benefit. Ensuring that you have a complete plan for your estate means that your will and financial plan are aligned. To achieve this, you need to work with both a lawyer and your financial planner. Your lawyer is responsible to help you understand all of the legal scenarios and options available to you. This includes confirming that your beneficiary is not also your witness, ensuring that you have selected an executor that is up to the task and making sure that you not only have a will but also have a personal directive and a power of attorney. To ensure that everything outlined in your will is aligned with your wishes, your lawyer should complete your estate plan and can coordinate proper tax planning, asset transfer, and succession planning if necessary. Alternatively, your financial advisor can coordinate your team of professionals and ensure their advice is reflected in your long-term financial plan.

Many people believe that to be fair to each child, they need to leave them the same asset, but forget to consider all of the other components. For example, a client has three children and to keep everything equal she decides to leave each of them a property and then to divide her remaining assets three ways. This sounds fair on paper, but what happens if she forgot to include the consequences of capital gains and outstanding mortgages in her wishes. If these factors were not properly accounted for, then her children may have to sell the property they inherited to pay for the outstanding debt and taxes. Having your team of professionals work together ensures that your wishes are achieved.

Contract negotiations are another scenario where most people would agree that using a lawyer is a good idea. The contracting process can be time-consuming to understand and is often complicated. There are many clauses and riders included within these agreements that need to be factored into your financial plan. This is where your financial advisor and your lawyer can come together to ensure that you are getting the right compensation mix while still getting the best deal. Some compensation packages include the use of equity or equity-like instruments that have significant tax complications and consequences. If these are not correctly factored into your overall picture, you could pay far more tax than you would otherwise, which potentially makes the opportunity less lucrative for you. Having these two professionals on the same page ensures that you get the best deal for your situation.

For many business owners, the sale of their business can be one of the hardest and most rewarding experiences. It can also be one of the most tedious. Many different factors need to be considered when selling a business, most of which cannot be addressed by one single professional. This is a situation where working with your financial advisor, accountant, as well as your lawyer can be very beneficial. Your lawyer can work to negotiate you the best deal possible, while your accountant coordinates all of the necessary planning, including managing tax. Your financial advisor will adjust your retirement and estate plans, mitigating any new risks that have arisen and tailor your investment portfolio to account for the change.

Overall, these scenarios help to demonstrate the strength that is found when great professionals come together and collaborate on a problem. Good legal advice is amplified into great life advice through proactive collaboration among your professional team. Choosing the right professional is key to your long term financial future and picking the right lawyer is no exception. We hope that you enjoyed learning a little about how lawyers and financial planners work together to improve your situation and thank you for taking the time to read this article. Also, if you did not get a chance to read the first part of this series about accountants, you can do so here.