Missed opportunities in estate planning: Beyond wills and trusts

Editor: Theodore J. Sarenski, CPA/PFS

Ask 10 CPA financial planners the most important techniques that they use, and they will undoubtedly give 10 different answers. The area of financial planning offers flexibility to CPAs and can be a catalyst for great creativity in working with clients. Generally, no set programs must be followed, even though most CPA financial planners cover many of the same areas. This column reviews some techniques critical to estate planning that go beyond the drafting of wills and trusts.

At the beginning of the engagement, the CPA financial planner should provide each client a questionnaire (whether as a hard copy or electronically). Involving the client in setting forth the information that is being sought with the questionnaire results in a better knowledge of the facts and provides the client and spouse, where appropriate, with buy-in to the financial planning process. See the Personal Finance Scorecard (available at www.aicpa.org; AICPA member login required) for a simple version of a questionnaire.

Once the completed questionnaire is returned, a detailed agenda is prepared for the initial meeting. (The author normally instructs clients not to treat the booklet as a test but to make estimates and skip questions that they are not sure of.) Each meeting agenda begins with an in-depth discussion of the client’s goals and objectives as they have been set forth in the questionnaire.

In providing “takeaway” information to clients, it has been found that handing them a form letter of instruction is one of the important outcomes of the session. The letter sets forth information vital to those who are mourning the death of a loved one who had greater knowledge of the family finances. Clients are encouraged to add information or thoughts they may wish to convey to each other or to those who will be reading the letter sometime in the future.

To some extent, the completed questionnaire leads into the proposed letter of instruction by informing the CPA financial planner of several issues that may otherwise be overlooked. Topics covered in the letter of instruction should include, for example, information about funeral arrangements, the location of the client’s safe deposit box, passwords, company benefits, and the location of important estate planning documents.

Burial arrangements

Although it can be an unpleasant issue to discuss, a CPA financial planner should raise the subject of burial arrangements. This has been an important issue since early in the author’s practice as a CPA financial planner. Shortly after an estate planning meeting with a married couple, the husband, who was the picture of health in his early 40s, was stricken with a mysterious illness and died two days later. Shortly thereafter, the widow called the author to say that the discussion about burial arrangements was very helpful, “as it was the first time we ever discussed it, and I had a direction to go by.”

In another situation, a client became quite engaged in the funeral process, something he had avoided thinking about his entire life. He interviewed a number of funeral directors and chose the person he was most comfortable with. In addition, he provided his family, through the letter of instruction, with specific directions. He even named those he wished would provide eulogies at the funeral.

Frequent flyer miles

Any client who travels extensively may be enrolled in a frequent flyer program that has built up a substantial balance of reward points. The issue of which beneficiary should receive the unused portion of these programs when the client dies can cause a long discussion. The information from these discussions is useful when preparing a will. Some years ago, the airlines balked at these bequests, but almost all (without making any announcements) accept these bequests when there is clear language in a probated will, though some airlines still have a policy of canceling reward points upon a member’s death.

To the author’s knowledge, no statistics exist as to how many wills have provisions for bequeathing frequent flyer points. The author assumes even meticulously prepared wills and trusts generally do not mention them.

Document location

To many, a safe deposit box is a relic. However, clients who do use a safe deposit box may leave heirs with several issues. Some clients may not let anyone know they have a safe deposit box or where it is located. It is important to note who has access to the safe deposit box, where the keys are located, and what it contains. Original wills and powers of attorney should never be kept in a safe deposit box. These original documents generally should be in the possession of the attorney. If the client requires easy access to these documents while keeping them from the eyes of others, copies can be placed in the safe deposit box.

Beneficiary designations

It is also important to carefully review all beneficiary designation forms. In many cases the clients cannot produce copies of IRA or life insurance beneficiary designations. In some situations, the client is surprised that a divorced former spouse would be a significant beneficiary of an IRA, Sec. 401(k) plan, or life insurance policy because new beneficiary designations were not prepared when the divorce was finalized. Sometimes, the client fails to update beneficiary designations after children are born, causing them to be overlooked as potential beneficiaries.

Checking credit reports

Despite widespread knowledge that checking a credit report is important, a survey conducted by Harris Poll last March for the AICPA found that only 61% of adults said they had ever looked at their credit report. Taking a look at credit reporting is an area that merits greater due diligence than in the past, especially given the increase in cybercrimes.

It has become much easier to do so in recent years. Everyone is entitled to one free copy of their credit report every 12 months from each of the three nationwide credit reporting companies (Equifax, Experian, and TransUnion). The reports can be ordered online from ­AnnualCreditReport.com, the only authorized website for free credit reports, or by calling 877-322-8228. Clients can also sign up for free services to receive online credit scores from all three reporting companies. There are some variations, and these services purport to monitor credit and provide identity theft protection. However, clients are cautioned to read the fine print so that they sign up for the free service and do not subject themselves to any recurring charges.

Meeting the client’s needs

It is almost impossible to conjure up all of the possible areas the CPA financial planner should be reviewing with an estate planning client. The CPA financial planner has to determine which of these are important to the particular client he or she is working with. In the final analysis, it is the CPA financial planner’s responsibility to provide a client with an agenda that meets his or her needs and to complete an estate plan that fits those needs.