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Patricia
Annino

Four trends in estate planning

Providing the best service to clients may depend on paying attention to these changes.

September 20, 2012

by Patricia M. Annino, J.D.

Over the past few years, I have noticed several notable trends in the estate planning process that just a few short years ago weren’t even part of the main conversation. These developments, however, have been occurring with increased frequency and will likely continue to grow in prominence.  

1. The increased importance of competence planning

What would you do if:

  • A son came to you and asked you to represent him in a court proceeding to put his father under guardianship for lack of competence, so that the son, once he became guardian, could obtain a divorce for his father, and implement the terms of a prenuptial agreement? And now that his father “no longer knows who he is or who he is married to,” the inheritance will be preserved for the son and his siblings?
  • A daughter came to you knowing that when her father dies there will be a will contest and therefore wants to bring up the fight now while there are witnesses?
  • A son who tried many times to talk to his father about his declining competence, and out of concern for the father and frustration with his father’s inability to deal with the subject, came to you for help in becoming his father’s guardian?

During the past two years, I have taken on cases with these exact scenarios. Each is complex for a variety of reasons, but each highlights the growing importance of competence planning. Simply stated, you need to put in place the legal mechanisms so that you can be taken care of in the way you wish.

It’s like the instructions you get from the flight attendant who tells you to put the oxygen mask over your own face first—after all, it is only when you put on your own mask that you then have the ability to protect others. In other words, protect yourself first.

Make sure the documents that will protect you if you are unable to care for yourself—a health care proxy and durable power of attorney—are up to date and accurately reflect your wishes. It is also critical to have coordination between those who are in charge of your personal health care decisions and those who are in charge of your finances, and that you do whatever you can to minimize conflict between those roles.

Now, more than ever, it is critical to understand that estate planning is much more than planning for what happens when you die. In an increasingly aging population that is living longer, it is essential to include disability or incapacity planning as an integral part of the estate planning process.

2. Rise of the influence of women in the estate planning process

Statistically, women outlive men. That means that many Baby Boomer women will inherit money twice—once from their parents and once from their husbands. A tremendous amount of wealth will pass into and through their hands. Many of these women, however, were never primarily responsible for managing the household finances or involved in the family’s wealth management plans. Education leads to empowerment. Empowerment leads to action. Once this phenomenon is clearly understood, I recommend that financial, legal, and wealth advisers develop strategic programs to assist with the estate planning process.

3. Increases in estate, probate, and trust litigation

What would you do if a new client came to you with any of these scenarios:

  • A shopping mall was put in a trust many years ago, and the trust mandated income be distributed to the beneficiaries. As trustee during turbulent economic times, your client made the business decision to withhold income distribution in order to maintain a proper operating reserve. As a result, a cousin/beneficiary is suing your client to compel full income distribution. What does income mean? Does it mean trust income? Accounting income? Distributed income? Does the trustee have the right to withhold income if the document is silent on that point?
  • A new client believes that his sister took financial advantage of their mother and would like to challenge the mother’s will. But the will contains a clause that if anyone contests the will his/her beneficial ownership interest is forfeited. What would you say to him?
  • A will names the oldest brother as trustee of the family business enterprise. The other siblings have never trusted him and come to your office with the request that he open the books and provide some transparency so that they can see for themselves how the affairs are being handled, and that he is telling the truth when he states that he is distributing the required funds to his siblings. This is one step short of litigation. How can this situation be defused?

These are actual examples of some of my recent cases. I have noticed that during turbulent economic times, patience is at an all-time low and heightened financial stress has forced challenges and court actions that, in the past, may have been otherwise resolved. I believe this trend is here to stay and that it is important to contemplate this when designing and implementing the business and estate plans for families.

4. Increased client need for transparency, simplicity, and collaboration

We live in an increasingly complex, post-Bernie Madoff world. People don’t know whom to trust with their wealth. They don’t understand their estate planning documents. They don’t understand or contemplate how the system of financial planning, estate planning, and wealth management works. Old assumptions have eroded. Transparency is critical. Vetting and supervising wealth managers are increasingly complex tasks. Many families have multiple advisers—wealth managers, accountants, lawyers, and trust officers.

In this complicated time, if the right hand doesn’t know what the left hand is doing the result may be a disaster. As advisers, it is important that we keep this in mind and develop strategies to take these needs into account. These trends have been increasingly appearing, which is a strong indicator that we, as advisers and counselors, should pay close attention to how we can provide our clients with the tools and information they need to best care for themselves and their loved ones.

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Patricia M. Annino, J.D., LL.M., chairs the Estate Planning Practice Group at Prince Lobel Tye LLP in Boston. She is a Fellow of The American College of Trust and Estate Counsel.

The AICPA’s Personal Financial Planning Section is the premier provider of information, tools, advocacy, and guidance for CPAs who specialize in providing estate, tax, retirement, risk management, and investment planning advice to individuals and closely held entities. All members of the AICPA are eligible to join the PFP Section. If you are a CPA who wants to demonstrate your expertise in this subject matter, become a Personal Financial Specialist credential holder. Visit www.aicpa.org/PFP to learn more.