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Preparing Clients for Every Eventuality

Oct 26th 2017
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Whether you are specifically advising clients on estate planning, engaged in wealth management or not, would you know what to do if they lost a loved one?

Later in my financial services career, I heard a story from a friend who was also a former client and the final words of his last surviving parent were: “Son, I’m sorry about what you are about to go through.”  He later learned his wealthy parents had paid almost no attention to their finances for years. 

Taxes and penalties weren’t paid, dividend checks accumulated and matured bonds (then in paper form) were never redeemed. It took the son years to sort out as he served in his role as executor.

Older clients may be in good health, yet they know they won’t last forever. In a Forbes article, the investment firm UBS divided retirement into three phases: Transition, My Time and The Last Waltz. As their CPA, you may have clients who are in the third stage.

Why Me? How?

Should you have a conversation with your client? It’s possible their insurance agent or other financial advisor has already done it. If not, or if you sense your client is anxious, this is another way to show the value you bring to the relationship.

It’s an awkward conversation. You might present it in the third person:  “I advise most of my clients in their 80’s…” 

You might also position it as a cautionary tale. Let’s assume you are limiting your concerns to financial and certain physical assets. Let’s also assume their estate isn’t at the size where they will need extensive tax planning at this point.

Seven Sensible Points to Discuss

These points make good estate planning sense, yet they will also give your client peace of mind during their lifetime.  You will have helped remove a heavy burden.

1. Wills – Do they have a will?  According to the AARP and, 60% of Americans do not.

Action Step:  Let’s assume your client is in the smarter 40%.  Does at least one family member know where it’s kept?  Does the family attorney have a copy?

2. Beneficiaries - Often people use “set it and forget it” logic.  They listed beneficiaries when they opened an IRA 40 years ago.  Logically, it’s their spouse. However, they divorced or the first spouse died in the meantime. Their current family might not receive the proceeds because the beneficiary designations weren’t updated

Action Step:  Suggest they meet with their financial advisor, banker or insurance agent and confirm the proper people are listed.  A good financial advisor can get this done quickly.

3. All Together – They have insurance policies, deeds to real estate, car titles, brokerage account statements and lots of other proof they have assets.  Many institutions have gotten away from paper statements. If something happened to them, who would know where those assets are located?

Action Step:  Their previous year’s tax return would list accounts that do tax reporting. A document organizer would be even better.  Perhaps you have some with your firm name listed.

4. Charitable Giving (1) – Your client might live alone.  They might be very close to their college or religious institution.  Their intent may have been to “remember them in their will.”  This needs to be added to the will.  The executor needs some form of instructions.  They might consider giving some gifts during their lifetime.

Action Step:  Talk about charities they want to support.  What’s their plan?  How is this going to happen?  Don’t rely on a spouse’s memory.

5. Charitable Giving (2) – If your client is going to eventually leave a substantial estate, it may make sense to name a few charities as beneficiaries on their IRAs.  This can help reduce the size of their estate. It makes logical sense, but your client may have compartmentalized their IRA with “set it and forget it” logic.

Action Step:  They might logically be taking Required Minimum Distributions (RMD) after age 70 ½. Do they foresee a need for additional funds for living expenses?  If not, planning future charitable giving may be a good idea.

6. Get Collections Valued – Your client has a passion for wine.  They’ve built up a substantial cellar.  Is it properly cataloged and insured?  Would their executor realize its value? 

Action Step:  Regardless of the collection, getting it professionally appraised and listed on their insurance policy also protects them during their lifetime.

7. Give Stuff Away Now – They have far more jewelry than they will ever wear.  They have children, grandchildren, nieces and nephews.  Unless their will is incredibly detailed, it will be hard to sort out ‘who gets what” after the fact.  The future heirs would probably love to get something that’s beautiful, shiny and valuable during your client’s lifetime.

Action Step: Either commit the plan to writing that’s legally binding or consider sharing the wealth when you can see the appreciation on their faces.

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