Many people believe that they don't need estate planning. They think is for the ultra-wealthy. But accountants and other financial planners know that everyone needs some basic form of estate planning. If your clients' have any sort of assets, this is the only way to assure that these will be passed to the intended beneficiaries upon their passing.
The sad truth is, however, that even a wealthy client is often hesitant to have their accountant or financial planner create an estate plan for them. Maybe they think they are courting death, or fear it. No matter the reason for your clients' hesitation, it truly is part of your job if you handle their finances to make sure all clients have an estate plan in place. When we die, our estate goes through a probate process. The goal of estate planning is to minimize the effects of probate.
Changes and Highlights: Estate Planning for Your Clients
As an accountant or financial planner, you know what a sad and tragic thing probate can be. If a person dies intestate it means there is no estate plan or even a basic will. Once this happens, the probate process starts. Creditors are notified. The probate hearing becomes public information. Anyone that thinks they have a claim to your accounting or financial planning client's estate can petition the probate court for what they believe is their share of assets. Without an estate plan, your client's assets are at the mercy of the state and who it thinks the assets should go to.
2017 Brought Major Change-Death Tax Only Applies to Ultra-Wealthy
Estate planning used to be looked at as a way to save on the death tax. Things changed in 2017. A client of your accounting or financial planning practice must now have assets exceeding $5.89 million to be subject to the death tax. If they are married and elect portability, their surviving spouse can use the unused portion of the deceased spouse’s first estate tax exemption. As a result, the estate tax for most of your clients won't ever come into play.
Let's Talk About a Trust and Minor Children
If your client wants you to set up a trust as part of their estate planning, by all means, encourage them to do so. This way, they are in control of how the assets of the trust are inherited. A trust is often used when there are minor children involved. The control your client has can be wide and varied. For instance, if a minor child is a beneficiary of the trust, it is not uncommon to put an age limit on when they can inherit the assets. The assets earmarked to minors are just kept in the trust until the restrictions are met, and then the trustee distributes the assets. One thing that is also not uncommon in the stipulations of a trust is to have a drug and alcohol provision. If the minor beneficiary has a drug or alcohol problem, then they don’t inherit the assets. The assets will just stay in the trust until such a time as the beneficiary resolves their addiction. Another stipulation in the trust that is often included is that the minor child does not inherit the assets until they complete college with a 3.0 GPA.
These are just a few of the highlights involved in estate planning. The Rules of Thumb blog from MoneyThumb enjoys educating our readers. We suggest that all accountants and financial planners stay up-to-date on the details of setting up estate plans and learn the ins and outs of creating trusts. This way, you are even more of an asset to your clients.