Category: Advisor Focused

Along with warmer weather and lazy days spent at the pool, summertime also often includes a family gathering, such as a Fourth of July barbecue, a family vacation, a reunion, or time spent at a family cabin or lake house. Whatever the form, in our always-on-the-go society, getting the whole family together is a rare occurrence. Clients should take advantage of this time together to discuss their estate and financial wishes with their families. As an advisor, you can help facilitate and encourage this discussion in the following ways.

Meet Your Client’s Trusted Decision Makers Now

You can encourage a client to discuss their estate and financial plans with their family by offering to meet with your client and their trusted decision makers now. Clients often select adult children to act in trusted decision-making roles, such as a successor trustee, executor or personal representative, or agent under a financial power of attorney. By meeting these trusted decision makers now before they are needed, you can begin to develop a relationship with them and be an advisor that the family feels comfortable turning to for guidance when needed. Summertime, when family comes to visit, is the perfect time to have this meeting.

As part of this meeting, you can review the client’s important documents with the trusted decision makers so that they know what the client’s wishes are and how they should be carried out when the time comes. You can also answer any questions the client or the decision makers have about the client’s plan or their roles.

Have a Family Meeting

Another way you can help your client have a family discussion about their estate and financial plans is to offer to meet with your client’s entire family and conduct a family meeting. Clients often feel that they lack the skill set or knowledge to explain the sometimes complicated legal and financial concepts involved in their plans. After all, it is one thing to understand a concept when it is explained to you but quite another to try to explain the concept to someone else. 

A client may also feel uncertain about how their family will react to their estate and financial plans. Having their advisor, an unrelated and objective party, there to explain the client’s plans and the benefits of those plans and answer any questions or concerns that their family members may have can remove some of the emotional upset or criticism that could emerge.

By offering to attend and conduct a family meeting, you can reduce or eliminate your client’s fears about explaining their estate and financial plans to their family. You can also be invaluable in helping the client determine the best format for this family meeting. For example, should the family meeting be siblings only, or should in-laws also be included? Should the family meeting include grandchildren? Your knowledge of your client’s family dynamics and plans will be extremely useful in determining the best format for the family meeting.

Summertime is a common time for families to get together. Encourage your clients to take advantage of this time to discuss their estate and financial wishes with their families by offering to meet with their trusted decision makers or to conduct a family meeting. Doing so is a great way to provide added value to your clients. Please reach out to us if you need assistance discussing these ideas with your clients or hosting a meeting.

For over a quarter of a century, the National Safety Council has recognized June as National Safety Month. An objective of National Safety Month is to raise public awareness of the top safety and health risks in the United States. One of the lesser-known but considerable risks Americans and their loved ones face are the financial and emotional repercussions that can accompany incapacity or death. A revocable living trust is a legal tool that can keep clients and their loved ones safe from the costs, uncertainty, and confusion that may result upon a client’s incapacity or death.
 
A Revocable Living Trust Protects the Client
Like every person, a client is at constant risk of suffering a disastrous accident or illness that may render them incapable of caring for themselves or their loved ones. Their incapacity could be temporary, or it could last until their eventual death. The total cost of incapacity, which may include lost wages and the cost of required medical care (if a client’s incapacity requires assistance with the activities of daily living such as bathing, eating or dressing), is difficult to calculate. However, it can quickly become very costly: the average cost of assisted living in the United States in 2020 was $4,300 per month.^[1]
 
A revocable living trust protects clients by providing instructions for how they and their loved ones are to be financially supported during the client’s incapacity. A revocable living trust also allows clients to choose who will handle their finances when they are unable to handle them themselves. Further, there is no better time than now to put a revocable living trust in place because the trust is revocable, which means that clients can change their mind at any time and alter their trust as their life circumstances change, as long as they have mental capacity.
 
A Revocable Living Trust Protects the Client’s Loved Ones
A revocable living trust also protects a client’s loved ones. It provides specific instructions for what clients want to have happen upon their incapacity or death, which means that their loved ones will not be left guessing what they would have wanted, or worse, have to look to state law to determine who should be given the authority to handle their financial and end-of-life affairs.
 
Estate administration fees vary widely by state, but they too can be very costly. In California, for example, where probate attorney and executor fees are set by law, the attorney and executor fees to probate a home worth $800,000 could be as much as $38,000.^[2] A revocable living trust, however, can avoid probate and the associated probate fees.
 
Another benefit of revocable living trusts is that they can remain private. Without the instructions contained in a revocable living trust, family members are often forced to resort to public court processes, which means that the court and other nosy individuals may be prying into the client’s very private matters.
 
Further, a revocable living trust can provide basic marital deduction planning to maximize the use of the client’s and their spouse’s estate tax exemptions so that their loved ones do not face a large estate tax burden after their death. Finally, using a revocable living trust allows the client to protect the money they leave to their loved ones from their beneficiary’s creditors.
 
A Revocable Living Trust Must Be Properly Funded to Work
In order for a revocable living trust to work, it must be properly funded, which means that the client’s property must be owned by the trust, or for certain types of property, the trust must be named as the beneficiary. If the revocable living trust is not properly funded, then a probate may be needed. Advisors play an important role in ensuring that the appropriate accounts are owned by the trust or that the beneficiary designations name the trust.
 
Because the instructions contained in a revocable living trust are so vital, it is important that they are reviewed periodically. Check in with clients to ensure that they have reviewed their document within the last year and that it still reflects their wishes and their situation. If changes are needed, make sure they contact their estate planning attorney, who can help update their revocable living trust so that it works for them and their loved ones during incapacity and at their death.
 
If you or your clients need any assistance with creating or updating a revocable living trust, please contact us, as we are happy to help.

The month of May means not only the end of the school year and the beginning of summer but also the beginning of the busiest moving season of the year. That’s why May is National Moving Month. Your clients have a lot to think about when moving: along with organizing and packing up all of their belongings, there is also starting and stopping utilities, mail forwarding, updating voter registration, and so on. While the ever-growing number of items on their moving to-do list may be overwhelming, there are three important things you can do to help any client in the process of moving: (1) make sure they know where their important documents are, (2) help them set a moving budget, and (3) continue as their advisor, or connect them to a new advisor.
 
Make Sure They Know Where Their Important Documents Are
 
In all of the chaos of moving boxes and packing tape, it is easy for things to get lost in the shuffle or even thrown out during a move. Yet certain important documents, such as birth certificates, social security cards, passports, financial statements, and estate planning documents, should not be packed up and put on the moving truck along with the client’s dishes and shoes. You can help your client keep their important documents safe and accessible during their move and ensure that these items do not get thrown out by accident.
 
One idea you can suggest to your clients is that they purchase a portable file box with an attached lid and a secure latch. Purchasing a brightly colored one can make it more easily identifiable. Then, they should place this file box in a secure and easily accessible location. If they are moving locally, a logical place might be at a family member’s or friend’s home. If they are moving a longer distance, then that place might be the trunk of their car.
 
It is also wise for them to make electronic backup copies of all of their important documents. This could take the form of taking pictures of their documents and saving them to their smartphone, a password-protected removable flash or external hard drive, or storing them in the cloud. Then they will at least have a copy of these important documents in case they cannot locate the original. You can let your client know if you, as their advisor, have also made and stored copies of any of these important documents.
 
By helping your client with this simple step in the moving process, you will save them a lot of time and headache when, for example, they are not having to run around searching through unpacked boxes for their children’s birth certificates so that they can register them for their new school.
 
Help Them Set a Moving Budget
 
One of the pressing questions associated with a move is how much it will cost. Although the final calculation of cost will depend on factors such as the size of the client’s home, the distance the client is moving, and the client’s willingness to take on DIY projects, encourage clients to reach out to you or their financial advisor to help them set a moving budget that aligns with their long-term financial goals.
           
Continue as Their Advisor or Connect Them to a New One
 
Finally, you should discuss with your client whether you will be able to continue being their advisor after their move. In situations where it is not possible to continue being their advisor, such as when a client is moving to a state where their current estate planning attorney is not licensed to practice, then the advisor can help make the client’s transition easier by connecting them with a competent attorney in their new home town.
 
For example, a will or trust created in one state should generally be valid in the client’s new home state. However, some documents, such as a financial or medical power of attorney, can be state-specific. Because estate planning laws vary by state, it is highly recommended that they have their estate planning documents reviewed to ensure their validity in the client’s new state. Their estate planning attorney can review their documents or you can connect them with an attorney in their new state who can review them.
 
If the client is married, their out-of-state move may have additional estate planning implications if they are moving to or from a community property state. Currently, there are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Moving from a community property state to a noncommunity property state (i.e., a common law state) or from a common law state to a community property state raises questions about whether community property remains or becomes community property. For example, if a couple acquires a home in California during their marriage and then moves to Nebraska and purchases a new home in Nebraska with the proceeds from the sale of their home in California, is the new Nebraska home community property? The client’s estate planning attorney can help answer these questions.
 
There is a lot to think about when moving, but it will ease the client’s burden if (1) they know where their important documents are, (2) they have a moving budget, and (3) they know they will continue to receive great advice from their advisor team after their move. If you need any assistance with a client who is moving, give us a call.

When it comes to death and what to do with a deceased’s remains, most people think of only two options: burial or cremation. However, these options are not particularly environmentally friendly. Burial, which is arguably the worst option from an environmental standpoint, uses an estimated 100,000 tons of steel, 1.5 million tons of concrete, 77,000 trees and 4.3 million gallons of embalming fluid every year.^[1] Some of that 4.3 million gallons of carcinogenic embalming fluid likely leaks into the earth, polluting our water and soil. Cremation, often considered the greener option, is not much better. Some estimate that one cremation uses about as much gas and electricity as a 500-mile road trip and gives off around 250 pounds of carbon dioxide.^[2] For those clients that are more environmentally minded, here are some nontraditional, eco-friendly burial ideas. An added benefit is that many of these environmentally friendly ideas are also less expensive than the traditional options.
 
Aquamation
 
Aquamation (also known as water cremation or alkaline hydrolysis) is a water-based alternative to traditional cremation. The process, which has been legalized in about twenty states, uses a solution of water and potassium hydroxide or sodium hydroxide, which is heated to a temperature of about 350 degrees Fahrenheit. At the end of the process, only the bone matter is left, which can be dried and crushed and given to the deceased’s family to do with as they please. Desmond Tutu, the Anglican archbishop, anti-apartheid leader, and environmental advocate, requested aquamation instead of cremation by fire likely because he knew that aquamation uses an estimated 90 percent less energy than cremation by fire. After the aquamation process was complete, his ashes were interred in St. George’s Cathedral in Cape Town, South Africa.
 
Mushroom Burial Suit
 
Actor Luke Perry, probably best known for his role as Dylan McKay on the Beverly Hills, 90210 TV series, was buried in a specially made biodegradable mushroom suit after his organs were donated. While this may sound like a quirky celebrity antic, the creator of the mushroom burial suit says the mushroom spores that line this special suit are trained to consume dead human tissue. Human remains contain toxins that are released into the atmosphere during cremation or through other methods of burial. Mushrooms can absorb and purify these toxins, resulting in a cleaner earth. After breaking down the human tissue, the mushrooms conduct the nutrients from the body to fungi in the soil that then pass these nutrients on to trees.
 
Green Burial
 
If a mushroom suit is not your client’s preferred method, they may want to consider a green burial. A green burial is similar to a normal burial except no embalming fluids or toxic chemicals of any kind are used. Rather than using a gas-guzzling machine to dig the grave, the green burial ground staff—or even the client’s loved ones themselves— dig the grave by hand. To allow the body to decompose in a natural way, no cement burial vault is used, and only caskets made from biodegradable materials, such as wicker, are used. Alternatively, the casket can be eliminated altogether, and the body can simply be buried in a cloth shroud. Many green burial grounds are used as animal and plant conservation sites.
 
Sea Burial
           
If your client loves the ocean, a sea burial may be perfect for them. Sea burials may be a more familiar eco-friendly option as this method has been used for centuries by Vikings, pirates, and sailors. Today, sea burials may take the form of using a water-soluble urn or submerging a modified casket down to the ocean floor. More environmentally conscious sea burials may use natural burial shrouds or mix the person’s ashes with an eco-friendly concrete that is used to construct artificial reefs that foster aquatic life.
 
Recomposition
 
Recomposition, or body composting, is the process of converting human bodies into soil using natural means. The body is placed into a container with a mixture of wood chips, straw, and other organic materials that are then exposed to heat and oxygen to accelerate the decaying process. After about thirty days, the remains will have decomposed into about a cubic yard of soil, which the client’s loved ones can use in their gardens. Unfortunately for those who want to return to Mother Earth in this way, body composting is currently legal in only three states: Colorado, Oregon, and Washington. However, more states are considering legalizing the process, and body composting may soon gain in popularity.
 
Making burial decisions for a loved one can be an emotionally stressful experience for the family members who are left behind. These nontraditional methods may not be the first thing a family considers, so if a client wants their remains disposed of in a particular way, it is important to make this preference known by having an experienced attorney prepare their estate plan. It is also important that you, as the advisor, make sure there are funds available to help ensure that their burial wishes are carried out. Creating and funding a comprehensive burial plan in advance will reduce emotional stress for the grieving family members at the time of their loved one’s death. We welcome the opportunity to partner with you to ensure that your client’s wishes for their final resting place is honored and fulfilled.

We all plan for “just-in-case” scenarios. When packing for our week-long vacation, we throw in a rain jacket even though the weather forecast is sunny—just in case. When helping clients plan for the future, it is also important to consider what will happen just in case one of our clients’ loved ones becomes disabled.
 
We tend to think that disability is something that affects other people. But approximately 61 million adults in the United States live with a disability—that is one in four adults.^[1] And more than one in four twenty-year-olds will become disabled before reaching retirement age.^[2] Disability is unpredictable, and accidents or serious physical or mental conditions, such as cancer or mental illness, can happen to anyone at any age.
 
As helpful as it would be when advising our clients, no one has a crystal ball to see into the future. We do not know when a client will pass away, and we do not know what position a beneficiary will be in at the time of a client’s death. So even if our clients do not currently have a loved one who is disabled, it is critical not to overlook the question of what will happen if a client’s loved one becomes disabled at a future time.
 
If a loved one becomes disabled, they may need to rely on financial assistance from government programs such as Medicaid or Social Security Disability Insurance. Unfortunately, a monetary gift or inheritance may disqualify a person from receiving these public benefits. In this situation, a client’s well-meaning gift could become more of a curse than a blessing.
 
Standby Supplemental Needs Trust
To avoid the possibility that a disabled loved one will lose government benefits because they have too much money, a client may want to consider setting up a standby supplemental needs trust as part of their estate plan. The terms of a supplemental needs trust provide that the trust’s money and property are only available to “supplement” the government benefits a beneficiary may be receiving. Therefore, the trust’s money and property are not included as available resources when determining a beneficiary’s eligibility for government needs-based benefits. A “standby” supplemental needs trust does just what its name implies: the supplemental needs trust is not created automatically but is on standby and comes into existence only if a beneficiary is disabled at the time of the client’s death or, depending on the applicable state’s eligibility rules, becomes disabled at a later date but before the trust has been fully distributed. If the disabled beneficiary is receiving public assistance at the time of the client’s death, the inheritance the beneficiary receives in a properly drafted supplemental needs trust will not disqualify them from the public assistance benefits but instead can be used to supplement the benefits they are receiving from the government and enhance the beneficiary’s life.
 
When advising our clients about planning for the future, we provide great value by helping them think through the what-if scenarios. Failing to help them think through what would happen if a loved one became disabled could result in trust assets being completely consumed by a disabled beneficiary’s care instead of wisely invested and used to enhance their life. Further, such failure could be viewed as professional negligence.
 
Since no one knows what the future holds, nearly every client could benefit from including standby supplemental needs trust provisions in their estate plan. If the standby supplemental needs trust is not needed at the time of the client’s death, then the trust will not come into existence. But it does not hurt to include it—just in case.

February 21 is the day on which we celebrate several US presidents who made noteworthy contributions to our country. As with any discussion that involves politics, a discussion about US presidents risks generating a variety of opinions about which reasonable minds can disagree. However, politics is not the focus of this month’s newsletter. Instead, our aim is to examine a few of the important lessons we can learn from the estate planning of some of our country’s most famous political leaders. Armed with these important lessons from history, you can help your clients make better decisions for their own estate planning.
 
George Washington
Washington was arguably the most universally beloved and revered US president. Volumes have been written about this man and what he accomplished during his life. One significant achievement that few people know about is the care Washington took to ensure that his final affairs were in order and that those who relied on him were cared for to the best of his ability. Washington’s last will and testament, widely available online in its entirety, shows that he thought carefully about his final affairs and about those who depended on him; he also remembered many individuals by making very thoughtful decisions and gifts of items of personal property or specific bequests.^[1]
 
It is worth mentioning that Washington had a rather nontraditional family situation and had to carefully consider how his estate should be distributed among his loved ones. At age twenty-six, Washington married a widow, Martha Custis, who had two children of her own from her previous marriage, whom they raised together. After his stepson, John Custis, died during the war from an infection, Martha and George Washington raised John’s two youngest children as their own.^[2]  As a result of his blended family, Washington carefully crafted the language of his will to provide very specific bequests to each of his surviving family members to ensure that they were well cared for long after he was gone.
 
Washington provides an excellent example in the level of thought and care with which he crafted his estate planning. Even if we do not have the wealth that Washington died with, we can still be very deliberate and thoughtful when it comes to how much, and to whom, we leave our wealth and meaningful items of personal property. By spending sufficient time and effort to think about and memorialize how we want to leave our possessions to our loved ones, we can leave a real legacy that has the potential to benefit generations.
 
Thomas Jefferson
While equally as famous as George Washington, Thomas Jefferson’s financial situation was far less favorable than Washington’s upon his death. Despite being a brilliant intellectual and the principal author of the Declaration of Independence, Jefferson nevertheless struggled to manage his financial affairs during life. In addition, he was saddled with both debts inherited from his family and that he had assumed by cosigning on a loan for a friend who died prematurely. When Jefferson passed away, he still had significant debts that his family had to repay. Because Jefferson had valuable real property but very little liquid cash with which to pay his debts, his executor ultimately had to sell the family land at depressed market prices to raise enough cash to pay his debts.^[3] The unfortunate result of these circumstances was that very little of Jefferson’s property was able to be passed down within his family. 
 
Many families today face similar problems with illiquid or insolvent estates. This issue arises most often when a business or farm owner has significant wealth tied up in their business or land but little cash in reserve to settle debts or pay transfer taxes at death. This can cause the families left behind to feel intense pressure to sell the business or the land at significantly less than they might otherwise be able to sell it for under better conditions in order to raise the cash necessary to pay the debts or taxes that will shortly come due.
 
Life insurance is an important estate planning tool often used to provide sufficient cash to pay a deceased individual’s debts or transfer taxes. With the proper type and amount of life insurance, and by using certain estate planning tools such as irrevocable life insurance trusts, an individual can prevent a “land rich, cash poor” situation like that experienced by Thomas Jefferson’s family.
 
Abraham Lincoln
Another well-known and beloved US president—a lawyer, no less—very surprisingly died without a will or any other type of estate planning in place. Lincoln, like so many of us, quite possibly believed that he had many more years to address this important task. His tragic murder at the hands of a political malcontent plunged Lincoln’s family into a confusing and completely unfamiliar situation as they attempted to settle his affairs with no knowledge of where to begin. His oldest son, Robert, reached out to US Supreme Court Justice David Davis to take charge of Lincoln’s affairs.^[4] Justice Davis generously stepped away from his duties on the court to assist the Lincoln family with the local court process for settling Lincoln’s estate. His estate was divided between his wife and his living sons, most likely according to the default laws of the jurisdiction. However, it remains unclear whether this is how Lincoln would have wanted to see his property divided.
 
A key lesson is that no one knows when they will pass away. Even someone as important and well-versed in the law as Abraham Lincoln was caught unprepared for his untimely demise, sadly leaving others to guess what his wishes would have been with respect to his property. The family undoubtedly experienced significant distress and frustration by not having a clear understanding or plan in place for handling Lincoln’s final affairs. Had Lincoln put some basic planning such as a will or a trust in place prior to his death, perhaps he could have helped ease his family through a very challenging time when he was no longer available to them.
 
Learning from These Presidents
There is a great deal more that could be discussed and learned from the experiences of these and other US presidents as it relates to estate planning. As you discuss some of these lessons with your clients, we hope that you will be able to help them think about their own estate planning and what they might want to do differently going forward. If any of your clients have circumstances similar to those discussed above and you would like to learn more about how to craft an estate plan that is designed specifically for their unique situation, give us a call. We would be more than happy to visit with you or your clients and discuss these matters further. Until then, Happy President’s Day!

Not only is January the first month of a new year, it is also a time when many celebrate Hunt for Happiness Week (January 16-22, 2022). Happiness is something that humanity, in large part, has spent a tremendous amount of effort pursuing throughout history. Early on, happiness likely came from simple victories such as having a full belly, surviving another day, or simply staying warm. Over time, with the progress of civilization, happiness may have come from more complex sources such as art and literature, family and romantic relationships, religious worship, access to a wider variety of food and drink, education, and novel experiences. For many people, a lifetime is spent accumulating wealth in the effort to find happiness. But does the mere accumulation of wealth guarantee happiness? It depends on who you ask, of course. But most people will agree that happiness can be found from a variety of sources beyond total dollars reflected on a balance sheet.

When it comes to your clients finding happiness for themselves and their loved ones, consider how their estate planning might play a role in that process. The following steps can help ensure that the effort your clients put into their estate planning will contribute to their happiness and their family’s happiness rather than potentially diminish it. 

Step 1: Ask your client to identify and prioritize the experiences and activities that bring them the most happiness.

Rather than simply assuming that property or cash will bring continuing happiness to your client and then their family when they are gone, it is important to think about how their money and property can be used to generate happiness. Here are some examples:

• Is there a hobby that they and their families enjoy that they could more easily engage in as a result of the availability of money? Perhaps they have enjoyed hunting or fishing trips with their loved ones over the years. Maybe they have a love of live theater or musical performances that has brought them joy over the years as they have shared such experiences with their family. 
• Did they have international travel experiences that they look back on fondly and would like to repeat or extend to younger generations?
• Was education a source of particular joy and satisfaction over the years that your clients would like their loved ones to be able to experience?
• Is there a special vacation location or property that has many happy memories associated with it?

Whatever experiences or activities have brought your client and their loved ones happiness throughout their lives, the first step is to identify them and determine whether your client wants to make such experiences or activities a priority in their own estate planning. 

Step 2: Review the client’s important documents to see if they reflect those priorities.

Once you have identified your client’s priorities, you should help them review their important estate documents, such as life insurance and retirement account beneficiary designations, wills, trusts, pay-on-death designations on accounts, and the deeds and titles on their property. Does your client understand how their accounts and property will be transferred or paid out when they die? If so, will the resulting payments and transfers realistically support the client’s priorities that you have helped them identify in Step 1? Or does their current estate plan risk allowing their accounts and property to be used or spent on things other than your client’s priorities? If so, is your client comfortable with that potential result? 

Step 3: Encourage your client to contact us to make necessary changes or additions to their estate planning.

If your client is not comfortable with the way their current plan meets their priorities, then it is crucial that they do not delay in addressing these issues with their entire professional advisor team, including their attorney, CPA, and financial planner. As your client’s attorney, we can help them craft provisions in their will or living trust that will set aside a sum of money to fund education for successive generations, travel, hunting trips, family reunions, or other experiences that create happy memories the client would like to pass on. Further, in order for your client to protect their property from being squandered on material possessions or expenses that bring little happiness to their loved ones, your client may need to change beneficiary designations on life insurance, retirement accounts, or cash accounts to be payable to a trust, or make other protective arrangements that can help them achieve their priorities. 

It is only with careful planning that your clients can turn something as mundane and inanimate as money and property into experiences and opportunities that can bring true and lasting happiness to them and their loved ones for generations. With proper planning using the tools at our disposal, a team of professional advisors can help your clients effectively meet this worthwhile goal. Such efforts will undoubtedly increase the likelihood that your clients and their loved ones will find the happiness and satisfaction in life that are readily available to those who diligently seek it.

Imagine the following scenario: As a professional advisor, you have worked with a married couple for decades. They have been ideal clients, have taken a genuine interest in you and your family, and have told you on multiple occasions how much they appreciate your professional advice and friendship for all of these years. The wife passed away recently, and the husband’s health is failing. With no children of their own and only distant and estranged relatives within their family, they spent a large portion of their wealth over the years supporting a number of charitable organizations, but they did not wish to provide any further gifts to the charities at death. As a result, you eventually learn from the husband that you have been named as a beneficiary of their trust to receive a sizable distribution at the husband’s death. When you express your surprise and gratitude for this kind gesture, your client confirms that he and his wife had discussed providing you with such a gift for years and that they are happy to do so as a reflection of the affinity they feel toward you.
 
What Could Go Wrong?
As professional advisors, we often spend hours with our clients becoming familiar with some of the most personal details of their lives. Being a good listener and helping your client achieve their financial and tax planning goals can create a natural closeness and high personal regard for one another. For clients in similar circumstances to the fictional scenario described above, naming a trusted advisor and friend as a beneficiary of their will, trust, insurance policy, or retirement account can feel very natural and desirable. So why would a professional advisor ever refuse such a generous gesture from a client?
 
For advisors from certain professional backgrounds, deciding how to act in the above scenario is easy because it is already made for you. In some cases, allowing yourself as a professional advisor to be named as a beneficiary in a client’s estate plan can lead to an ethics complaint and possible sanctions by your professional regulatory authority.
 
FINRA Registered Investment Advisers
For example, professionals who are registered with and regulated by the Financial Industry Regulatory Authority (FINRA) are subject to FINRA Rule 3241. This rule requires any person registered with FINRA to decline being named as a beneficiary of a client’s estate or receipt of a bequest (gift at death) except under very limited circumstances. Those limited circumstances include being a member of the client’s immediate family (as defined in the rules) or seeking and obtaining written approval from the member firm with which the registered advisor is associated to accept such a gift or bequest. The rule is fairly straightforward and leaves very little room for differing interpretations. In general, a registered investment adviser cannot accept such a gift from or otherwise be a beneficiary of a client’s estate as in the scenario described above.
 
Attorneys
State bar association rules of professional conduct govern the ethical and professional responsibilities of members of the legal profession and are frequently adapted from the American Bar Association’s Model Rules. Under these rules, attorneys are also generally prohibited from being named as a beneficiary in a client’s will or trust document that the attorney prepared.^[1] For example, the Model Rules specifically prohibit a lawyer from “preparing on behalf of a client an instrument giving the lawyer or a person related to the lawyer any gift unless the lawyer or other recipient of the gift is related to the client.”^[2]
 
Accountants
Certified public accountants (CPAs) are also subject to rules that dissuade accounting professionals from accepting gifts or bequests from clients unless it can be clearly shown that such gifts do not impact the CPA’s ability to exercise independent judgment.^[3]
 
As the above-referenced professional rules of conduct demonstrate, in an estate planning context, the general principle is that a professional should seek to avoid profiting from the client’s death. Of course, there is nothing wrong with you providing the services you typically perform in the normal course of business, such as tax preparation or investment advice, to the executor or trustee appointed by your deceased client, as long as it is done within your profession’s rules of professional conduct. But where a professional obtains a windfall through a gift, bequest, or beneficiary designation that is clearly not compensation for services rendered, a professional should consider very carefully the wisdom of accepting such a gift.
 
If a client’s family member or another professional advisor were to learn of such a gift, there could be an assumption of impropriety or that you as the professional advisor have violated your fiduciary obligation to the client by seeking to exploit a relationship of trust for improper financial gain. Accusations of undue influence or questions surrounding your client’s mental capacity to make such gifts may arise. And even if it can be proven that you, as the professional, did not in fact engage in any pressure tactics or take advantage of your position of trust, there could nevertheless be significant controversy, professional complaints filed, and even litigation against you and your firm to get to the bottom of the situation or force some form of a financial settlement.
 
Beyond that, you may be jeopardizing your own professional licensure in your chosen profession, as well as significantly damaging the public’s perception of the ethical conduct of other members of your profession.
 
Professional advisors with clients who want to leave them gifts or bequests from their estates should almost always politely decline, explaining the practical and ethical reasons why accepting such gifts could be counterproductive to the client, the professional advisor, and the profession in general. The professional should then have a thoughtful discussion with the client about naming an appropriate alternative to the professional. The professional could also gently suggest a variety of charitable organizations that the client may find attractive as beneficiaries of a charitable gift, or even a charitable cause that is near to the heart of the professional advisor in lieu of the gift to the advisor.
 
Whatever the client ultimately decides, you will likely be able to sleep better at night knowing that a disgruntled heir of the client will not file a FINRA or ethical complaint against you long after the client has passed away. Furthermore, maintaining the integrity and ethical standards of your profession will undoubtedly pay dividends from a professional and reputational perspective that will far outweigh the financial benefits of accepting such gifts in the long run.

In the chilling words of several George R. R. Martin’s Game of Thrones characters, “Winter is coming.”
 
Along with this change of seasons comes a change in driving conditions in much of North America—slippery roads, rain, snow, less sunlight during the morning and evening commutes, and a variety of other hazards. Unfortunately, with an increase in such risks comes an increase in the likelihood of your clients being involved in a car accident. But far too few have given much thought to what steps should be taken if they are actually involved in a fender bender.
 
How Car Accidents Can Impact a Client’s Estate Plan
 
Healthcare decision-making. In the event of an accident where a client becomes unable to speak or make decisions for themselves due to an injury, they will need to have someone who can speak to doctors and medical providers on their behalf. If a client has planned in advance, a validly executed medical power of attorney will allow someone the client has chosen previously (a healthcare agent) to speak with doctors and arrange for treatment until the client regains consciousness. If a client does not have a medical power of attorney in place, decision-making authority could be unclear and might delay them receiving certain types of medical treatment. Thus, it is important that your clients not only have a medical power of attorney in place and signed, but also that they inform those closest to them about where to obtain a copy of it should they need to be rushed to a hospital in the event of an accident.
 
Adequate insurance coverage. Many people do not realize that carrying adequate insurance coverage is one of the most effective ways to protect themselves from lawsuits that would place their savings and property at risk of loss. Ensuring that your client carries adequate car insurance is one of the simplest ways you can help them ward off a lawsuit. Beyond increasing their car insurance limits, you may also want to discuss whether it would make sense for them to purchase an umbrella insurance policy. Umbrella policies act as a form of backup insurance to other types of primary casualty insurance policies. Essentially, if a client is involved in a car accident where the damages they caused exceed the limits of their car insurance policy, an umbrella insurance policy can step in and cover such excess liability. With both policies in place, there will be a large enough pool of insurance money that the insurance companies will have a much greater ability to settle any lawsuit against your client as a result of the car accident before it ends up in court where the plaintiff could seek payment from the client directly.
 
As part of your client’s estate planning review, you should discuss the limits of their car insurance policy and any umbrella policy that they may already have (or that they intend to purchase) and the types of protections that those policies provide. Adequate insurance can go a long way toward protecting their accounts and property from loss to a lawsuit as a result of a car accident.
 
Disability insurance. Clients should be reminded that in addition to the risks of being inadequately insured from a liability perspective, a car accident that results in their own injury could have both short- and long-term financial consequences from a disability perspective. Without the ability to engage in gainful employment, a family can suffer significant financial hardships in a very short period of time. Being unable to pay a mortgage, rent, car payments, utility bills, or healthcare expenses because of lost income can be devastating. Short-term and long-term disability insurance can therefore offer incredibly important protection against loss of income from such an accident. If your clients have not yet considered purchasing disability insurance to protect against this kind of risk, you may want to raise the topic with them sooner rather than later.
 
Personal Injury Settlements
In some cases, a personal injury settlement may be paid to your client in a lump sum. If your client has received such a settlement, it is important that you work with them to suggest prudent investment options that will protect the settlement funds from both the risk of major market losses as well as unnecessary diminishment from inflation. These funds should be protected and invested in a manner that will ensure that they are available to your client to provide for their needs, particularly when the client's needs have increased as a result of the injuries sustained in the accident.
 
Be Careful of Fraudulent Transfers
After a car accident where there are significant property damages and medical injuries, a client can be tempted to take steps to protect what they own if they fear that a lawsuit may result from the accident. But it is important to help your clients resist the temptation to begin transferring or retitling their property and accounts to friends or family in an effort to hide what they own to protect it from their creditors. In many states, taking such steps after an accident has occurred in which a client is liable is considered to be a fraudulent or voidable transfer that can be ignored by the courts.^[1] In other words, even though a client may have made an otherwise legal gift or transfer of their accounts and property to someone else, the courts are likely to allow the party in a successful lawsuit against the client to seize the property that your client has transferred to someone else in an effort to avoid having it used to pay the judgment against them.
 
No, Revocable Trusts Do Not Protect a Client’s Property from Personal Lawsuits
A very common misconception is that if your client creates a revocable living trust for estate planning purposes, they have thereby protected their assets from lawsuits and creditors. Unfortunately, this is simply not the case. While it is possible to design a revocable living trust that will protect a client’s assets after they have died from the creditors and lawsuits of the named beneficiaries of their trust (usually their loved ones), revocable trusts in general offer no protection against the client’s own creditors or lawsuits filed against them. This is because the client has complete control over the property placed in their revocable trust. And because they retain the power to revoke the trust, a judge can order them to revoke the trust and use the trust property to pay their creditors and lawsuit judgments.
 
That being said, there are certain types of irrevocable trusts and other asset protection strategies that, if designed properly, can greatly enhance the level of protection a client can obtain for their property. However, these should be explored with the assistance of an experienced asset protection and estate planning attorney to ensure proper creation and implementation.
 
When it comes to protecting a client’s accounts and property, the time for taking the necessary steps is well before an accident ever occurs. Doing so will help your clients maximize the amount of asset protection that is available to them through purchasing insurance or designing estate planning features that have a much better chance of warding off potential lawsuits in the event of an accident.
 
We hope that we have given you some things to consider along with your clients that will help you encourage them to revisit their estate planning. Protecting a client’s hard-earned accounts and property is a worthwhile investment of time and effort. If you or your clients are not sure where to start, give us a call. We would be happy to help them take the next step in preparing for the perils that winter can bring.

Next week is Estate Planning Awareness Week (October 18–24, 2021). To that end, this month’s newsletter is geared toward helping you, as a professional advisor, gain awareness and understanding of the most common estate planning myths. Left unaddressed, these myths can create serious trouble for families and individuals, often leading to intrafamily conflict, permanently damaged relationships, and lengthy and expensive court battles.
 
Myth #1: Estate planning is only for the wealthy.
When the topic of estate planning comes up, professional advisors often hear their clients respond with phrases like “Oh, estate planning is only for rich people,” or “Why do I need an estate plan? I plan to spend it all before I die!”
 
Unfortunately, this kind of response, perhaps subconsciously, allows the person making the statement to avoid having to expend any further energy thinking about the uncomfortable reality of their own mortality and the consequences of not having planned for their incapacity or death. As their professional advisor, consider whether you have a responsibility to gently push back on such responses from a client. Most things worth doing are going to involve some effort, and estate planning is no exception.
 
Incapacity Planning
Even individuals and couples of modest means may suddenly become incapacitated. When an individual cannot speak or make decisions during a period of incapacity, someone else will need to carry out that responsibility. Without estate planning documents in place (for example, a healthcare directive, trust, and financial power of attorney), a court will need to appoint a conservator or guardian to make decisions on behalf of the incapacitated client. Furthermore, the court will decide who will be placed in charge of your client’s accounts and property, resulting in additional expenses, delays, and significantly less privacy for your client. If the client wants to choose who will make financial and healthcare decisions for them, estate planning must be completed beforehand that names the appropriate individuals to carry out those responsibilities.
 
Planning with Trusts
We have heard of professional advisors telling a client that only wealthy individuals need a trust. However, such advice is too simplistic. When an individual dies owning real estate, even if they are of modest means, the probate court will need to authorize the sale or transfer of that property, which can result in additional expenses, delays, and loss of privacy. Establishing a trust and titling real estate in the name of the trust can be an effective way to eliminate the need for probate. For many people, avoiding probate is an important estate planning goal, particularly when the client desires to keep the distribution of their accounts and property private and efficient, even if they have what most would consider modest wealth. Probate avoidance may actually be more important for those of modest means because probate is not the most cost-effective way to transfer property at death.
 
Myth #2: Joint ownership is sufficient.
A client may declare to you that they do not need to engage in estate planning because they have already added their children to their accounts or on the title to their property. At first impression, it can be tempting to agree that this is sufficient to avoid probate; and while this can be one method for avoiding probate (both during life and at death), there are serious risks associated with joint ownership that are commonly overlooked. For example, adding children to an account or to the title of property can result in those accounts or property getting tangled up in that child’s divorce proceeding, lawsuit, or bankruptcy.
 
Furthermore, there could be gift tax consequences for adding a child to the ownership of certain property, particularly if that child received instructions from the client to divide and distribute that property to others after the client has passed away. Additionally, the joint owner may be under no legal obligation to follow the client’s instructions on how to divide the accounts and property after the client’s death. The joint owner could decide to keep the money or property rather than follow your client’s instructions with no legal consequences.
 
Myth #3: Avoiding taxes is the only reason to create an estate plan.
It can be easy to dismiss the need for an estate plan considering today’s historically high estate tax exemption ($11.7 million per person in 2021). Most Americans do not need to worry about estate taxes.^[1] However, tax avoidance is only one of many goals of estate planning, and in many cases it is not the most important goal. For example, planning for the orderly passing of your client’s treasured heirlooms to avoid family discord may be far more important than tax planning in the long run. Alternatively, your client may have children who are struggling financially or with substance abuse challenges, are in a rocky marriage, or work in high-liability professions. As a result, it may be crucial for your clients to ensure that whatever inheritance is left to those children is protected from loss to lawsuits, creditors, or divorcing spouses.
 
Myth #4: I can just name my loved ones on beneficiary designations.
In some states, accounts such as retirement accounts, life insurance, and bank accounts can be left to loved ones through beneficiary designations, while transfer-on-death deeds can be used to leave real property to loved ones. Utilizing such tools can avoid probate in most cases. However, when these types of accounts and property get transferred at death, they are direct transfers that cannot be protected from lawsuits, creditors, divorcing spouses, or other threats from third parties. In addition, if minor children are named as designated beneficiaries, a conservatorship must hold the property until the minor child reaches the age of majority (usually eighteen or twenty-one years old, depending upon state law). Once the child reaches that age, the accounts and property are transferred directly to the child, and a more mature loved one or financial manager will be unable to protect the funds for the child.
 
In addition, beneficiary designations and transfer-on-death deeds are useless in the case of the client’s disability or incapacity. Should the client become incapacitated, a conservator must be named through the court system to manage the property for the client’s benefit until the client dies and the transfer-on-death deeds or beneficiary designations become operable.
 
What You Can Do to Help Your Clients
Understanding these myths will put you in an excellent position to dispel them for your clients. By correcting these erroneous beliefs about estate planning, you can help your clients begin the estate planning process in a truly responsible and effective manner. As your clients begin to see the value of careful estate planning, your value to them as a professional advisor will undoubtedly grow. We would love to help you and your clients better understand the value of careful estate planning and how to avoid falling victim to these and many other estate planning myths. Give us a call today.