How Do You Ensure Thoroughness in Estate Planning for a Client With a Diverse Asset Portfolio?
Navigating the complexities of estate planning for clients with diverse assets requires meticulous strategies. We've gathered insights from leading legal minds, including Managing Partners and CEOs, to share their wisdom. From familiarizing with assets and beneficiaries to categorizing and evaluating all assets, explore the five detailed approaches these experts recommend for comprehensive estate planning.
- Familiarize With Assets and Beneficiaries
- Conduct Comprehensive Asset Inventory
- Break Down Estate Planning Process
- Consider Income in Respect of a Decedent
- Categorize and Evaluate All Assets
Familiarize With Assets and Beneficiaries
In my practice, one approach I emphasize for thorough estate planning, especially for clients with a diverse asset portfolio, is to deeply familiarize myself with the assets and beneficiaries involved. It's critical to know exactly which assets will be part of the estate and whom the testator intends to receive them. Although the estate plan should already specify these details, it's prudent to stay well-informed about every asset within the estate, including any changes that might occur from the time the estate plan is drafted to the testator's passing.
Assets aren't just limited to physical or financial properties; they also include outstanding debts. It's important to remember that many debts do not simply vanish after the testator's death; they may need to be settled from the estate or could be transferred to a beneficiary.
Additionally, not all assets go through the probate process. Some assets, like retirement accounts, jointly-owned properties, certain bank accounts, life insurance policies, and properties held in a life estate, bypass the will entirely. Therefore, it’s crucial to verify that the beneficiaries listed on these non-probate assets align with the testator’s wishes. This comprehensive understanding and regular updating ensure that the estate plan accurately reflects the client’s intentions and facilitates smooth estate administration.
Conduct Comprehensive Asset Inventory
One approach I take to ensure thoroughness in estate planning for a client with a diverse asset portfolio is to conduct a comprehensive asset inventory. This involves meticulously cataloging all the client's assets, including real estate, investments, business interests, retirement accounts, and personal property. I then collaborate closely with financial advisors, tax professionals, and other experts to understand the implications of each asset type and develop a customized plan that addresses the client's specific goals and needs. For example, in one case, I worked with a client who owned multiple rental properties, a business, and substantial investment accounts. By coordinating with a financial planner and a tax advisor, we were able to create a cohesive estate plan that minimized tax liabilities, ensured the seamless transfer of assets to heirs, and provided for the continued management of the rental properties. This holistic and collaborative approach ensures that every aspect of the client's diverse asset portfolio is addressed, providing peace of mind and clarity for their future.
Break Down Estate Planning Process
When handling estate planning for clients with diverse asset portfolios, an effective approach is to break the process down into smaller, more manageable parts. Instead of trying to tackle the entire estate plan at once, which can be overwhelming, I focus on setting up each key component sequentially. We start with drafting a will, then move on to establishing one or more trusts, and proceed with creating a power of attorney, a healthcare directive, and a power of attorney for healthcare. This methodical approach allows us to address each aspect thoroughly, ensuring that no detail is overlooked. It also enables us to prioritize the most pressing needs first, such as designating beneficiaries. By dealing with each piece one at a time, the entire process becomes less daunting and more effective.
Consider Income in Respect of a Decedent
One approach I emphasize in estate planning, especially for clients with a diverse asset portfolio, is considering Income in Respect of a Decedent (IRD) taxes. The Federal Estate Tax is well-known, but it's crucial not to overlook IRD. This tax affects individuals who inherit certain types of yet-to-be-taxed income. If a person passes away with income that has not been taxed, either their estate or their beneficiaries are responsible for paying income taxes on that amount.
Some examples of income that could be subject to IRD taxes include savings bond interest, payouts from individual retirement accounts, sales commissions, and other types of income that the decedent would have received if they had lived longer. To ensure a comprehensive estate plan that covers all potential tax implications, it’s vital to consult with a tax professional. This step helps guarantee that no aspect of the estate's tax obligations is overlooked, providing peace of mind for both the planner and the client.
Categorize and Evaluate All Assets
As the co-founder and personal injury attorney at Templer & Hirsch, I have over 30 years of legal expertise. Over the years, my expertise has helped our clients recover over $100 million, demonstrating a thorough awareness of the complexities of various legal situations, including estate planning. One essential technique I use to ensure thoroughness in estate planning for clients with a broad asset portfolio is categorizing and evaluating all assets. This method entails not only determining and assessing each asset's current value but also anticipating any future changes in value or liabilities. Real estate holdings, for example, may increase or decrease in value in response to market conditions, while company interests may change as industries shift. This may imply continuous revisions to the estate plan when the client acquires new assets or removes current ones. I previously dealt with a client who owned a diverse overseas real estate portfolio, stocks, and personal artifacts. By establishing a systematic review schedule, we modified the estate plan annually, ensuring that it appropriately reflected his current wealth and goals. Furthermore, we frequently incorporate digital asset management into our methods, acknowledging the growing significance of digital footprints in modern estate planning. This ensures that all components of a client's asset base, physical and digital, are entirely handled. Each client's situation is unique; thus, our solutions must be adapted to their specific requirements, providing precision and security for their assets and future legacies.
