Seven Questions to Ask When Reviewing Your Clients’ Estate Plans

Jan 11, 2012

2011 just ended as another challenging year. Most of us are happy to be rid of it and look forward to hopefully better things on the horizon. Although it is really just another month, January (and early February) is a time when advisors force themselves to:

• Do a year in review
• Prospect for 2012 meetings with clients
• Discuss performance and positioning for the year
• Assess risk for the client’s portfolio, as well as their own business

But what about beyond 2012? Will your clients (and their families) move forward with you?

Case in point
Last year, a wealthy client of an advisor I know passed away. The client was part of a book the advisor had purchased so he didn’t have a great relationship the client’s spouse and the rest of the family, but he did enjoy a fairly close relationship with the client. The relationship was strong enough that the client mentioned that he wanted the advisor to “look after” his family when he was gone.

Not too long after the client’s passing, along came the transfer request from the large faceless trust company that was written in as successor trustee of the client’s trust — a trust that was written years ago! The advisor was devastated that he wasn’t able to follow through with his client’s wishes , not to mention losing the family relationship and the assets. Unfortunately, as with most cases, the trustee required their own trust company to manage the assets of the trust.

Estate plan review
You probably don’t have a lot of great news to discuss in your year in review meetings with clients this year. The markets were choppy and flat, the economy is still stuck in neutral, Europe is still in crisis. Why not take time in your review meetings this year to look at their estate plan and do a beneficiary check for all your clients? When you send out the meeting reminder for your quarterly or year-in-review meeting, ask the client to bring in their estate plan documents.

1. If a corporate trustee is named, do they require that they manage the assets?  Be sure to review the trustees and successor trustee of each trust.
2. Does the titling of their accounts reflect the trust titling? If a couple has a revocable living trust but have their accounts and assets (including real estate) titled jointly or singly, they have not funded their trust and will face probate issues.
3. Does everything “add up?” Do the beneficiary designations on IRAs, insurance policies, annuity contracts, pensions, qualified and employer plans reflect correct titling and the intent or succession in the estate plan documents? Many families go through the planning process but miss the last part in terms of re-titling accounts and updating beneficiary designations. It also gives you a total picture of the family’s entire net worth.
4. Are the documents up to date? Are they more than five years old? Have there been major changes in the family since they were drafted? Generally, older documents do not have HIPPA language in medical directives (living wills) or in the case of trust documents, do not provide clear direction in the case of incapacity and how that is determined. A good rule of thumb is that estate plan documents should be reviewed every five years or in the case of changes in the family (marriage, divorce, death of a spouse or life partner, relocation, retirement, promotions, sale or purchase of a business, assets in multiple states, inheritance, serious illness/disability of a family member or partner, adoption or birth of children, grand children etc.).
5. Is the named trustee really capable of becoming trustee, if no corporate trustee is written?
6. Does the cost structure of the successor trustee  seem expensive?
7. Can you play a role? Look for a relationship with a private trust company that will appoint you as investment advisor for the trust.

Our job is to be forward thinking. For the client, they will have confidence that someone knows them and understands them is working with their family. For the advisor, you will have a longer, stronger relationship with the family that can last for many years.

What questions will you ask?

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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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