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CHECKLIST / FINANCIAL PLANNING

Estate Planning Action Steps

 

By Martin M. Shenkman, Esq., CPA/PFS
October 2011
Checklist

CPAs should play a more significant role than they often do in facilitating, implementing and monitoring client estate plans. National Estate Planning Awareness Week, Oct. 17–23, is an ideal time to encourage clients to address planning.

 

To download a sample client letter on estate planning, click here.

 

Here are some practical steps practitioners should consider:

 

  If you’re filing a Form 1041, U.S. Income Tax Return for Estates and Trusts, be certain that you have a copy of the fully executed trust in your file. You must ascertain whether the trust is revocable or irrevocable, a grantor trust and to whom, whether annual demand or Crummey powers are required, and whether the trust is exempt from generation-skipping transfer tax. Many of these issues are complex, but all need to be addressed properly. Recommend a meeting with the client and the attorney who drafted the trust so all operational and reporting issues are clear.

 

  If children or other heirs are being issued Schedule K-1s for the first time or for greater amounts than the prior tax year, make sure appropriate gift tax returns have been filed reporting the transfers. Do you have a current operating agreement (limited liability company) or partnership agreement (family limited partnership) in your permanent file that matches the ownership interests reflected on the K-1s? If annual gifts were made, has the entity’s attorney addressed whether those interests properly qualify for the gift tax annual exclusion?

 

  When reviewing a Form 1040, U.S. Individual Income Tax Return, check to see whether each spouse has assets in his or her name. Often, estate planners counsel clients to divide assets to facilitate funding a bypass trust. If Form 1099s, K-1s, property tax bills, etc. are predominantly in the name of just one spouse, it may be a tip-off that proper asset division has not been addressed.

 

  Use your knowledge of clients’ finances to help them establish an estate plan. Every estate plan begins with a balance sheet, family tree and client objectives. Practitioners can more cost-effectively summarize the essential financial data than most estate planning attorneys. Practitioners who have advised a family for decades will have a better understanding of family and business dynamics than an estate planning attorney who sees the client perhaps only once every three to five years. Attending the initial estate planning conference with key data prepared in advance will save the client money and ensure more detailed and accurate background information and a more productive meeting.

 

  Help clients project future needs and resources. No client should undertake an aggressive gift program or implement a plan to transfer significant assets to irrevocable trusts or heirs without first ensuring that they will have adequate resources for all their own needs. Not only are projections or a financial plan the foundation of any estate plan, but they also can be essential to supporting the bona fides of the transfers for asset protection and gift and estate tax audit purposes.

 

  Remain an integral and proactive part of the estate planning team. Practitioners who are not proactive may find clients’ trust and even other returns being prepared by law firms, banks and wealth management practices. More than a loss of business for the CPA, in many cases this trend is detrimental to making sure clients’ overall planning is optimized.

 

Click here to download a sample client letter on estate planning.

  

—By Martin M. Shenkman, Esq., CPA/PFS, (shenkman@shenkmanlaw.com) principal of Martin M. Shenkman PC of Paramus, N.J., and New York City and a frequent author and lecturer on wealth and estate planning.


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