One of the most frequent questions I get from new clients is "What do I need to bring to the initial meeting." This is a very important question and one I typically raise on my own if the client has not already asked. The answer to this question is anything that I need to see or will allow that meeting to be shorter. Because, as we all know - time is (your) money.
There is some basic information that I will need that you can put together in advance. This will save the time of gathering the information during the meeting. This generally includes the following:
1. Names and ages of you, your spouse and all of your children (and grandchildren, etc.). Also, if it is not obvious from your child's name, please indicate whether your child is a boy or girl. (In today's world, it is VERY common for girls to have names that were traditionally reserved for boys). A complete family tree would also be nice, especially if you have a more complicated family (second marriage, step-children, etc.)
2. A financial statement. This is very important. Sometimes clients will not bring this (even though I request it) and I suspect that it is because they don't want to spend the time pulling all the information together. Fight this urge. I will need a good sense of your finances before I can prepare your will, and if you don't prepare it prior to the meeting, then we will have to prepare it at the meeting.
On the financial statement, it also important to understand what I need. It is not important for me to know that you have exactly $10,512.63 in your checking account. If you tell me "about $10,000", that is close enough. What is important for me to know is that it is a checking account, as opposed to a retirement account (401(k), IRA, etc.) or an insurance policy or something else. Also, it is important for me to know how it is owned. Ownership is very important. Whether it is titled in your name or jointly with a spouse or someone else can have drastic consequences when it comes to the distribution of your estate, and I need to know that.
3. Think about who should be in charge of settling your estate if you should die. There are several important people that are appointed in your will - executor, trustee, guardian and power of attorney. You may not know exactly what each of these persons does prior to our meeting, but that is okay. It helps though to at least have thought about the people who you would consider for these jobs.
4. Should you bring previous wills? It is certainly okay to bring them. More information is better than not enough. But, if you bring all the other information above, then previous wills are probably not needed.
I have a questionnaire that I send to clients in advance of our meeting that helps them pull this information together. Fill it out. It is important and will save you time and money. This also something that a financial planner, if you have one, can help with.
Wednesday, June 22, 2011
Friday, June 17, 2011
When the Client is Wrong
The customer is always right.
Well, not always. Sometimes the customer, or in my case the client, is wrong. As a lawyer, how much and for how long do you push back before finally giving in to a client's demands. This is a really tough question for a lawyer to answer, and inevitably, the answer is it depends.
Of course, if the client is asking you to do something illegal or unethical, then as a lawyer you stop it right away, or if the client insists, you break-off the engagement. But, I am not talking about that situation. I am more interested in the situation where your experience and judgment make it clear that there is a better way to do something, but the client still insists on doing it another way.
In my practice, this problem can evidence itself in many ways, but one of most common involves the drafting of trust language. For example, when creating a trust, the far better way to draft a trust that will last many years into the future (in TN this can be up to 360 years) is to make it as broad and flexible as possible. Because none of us has a crystal ball, it is impossible to know what the circumstances may be in the future, and we want the trustee to have the flexibility to deal with any situation that arises.
Clients, though, occasionally have their owns thoughts. And, sometimes, they want specific thresholds that must be met before a distribution can be made. Things like - graduates from college, has a job, earns $X from his or her own efforts, gets married, etc., etc. Also, the incentives can be negative - is not in jail or on drugs, etc.
Of course, as soon as you set-up these guidelines, you create problems. What if a beneficiary has special needs and cannot attend college. What is a beneficiary decides to be a schoolteacher or enter the clergy, both noble pursuits, but likely not financially rewarding. What if the beneficiary is not in jail or on drugs, but is a spendthrift and will blow any money given to him or her. And on and on.
Most times I explain this to clients, they agree, and we do it my way. Occasionally, though, the client is resolute. So, what do you do? My practice has been to make the best case I can as often as I can for the "best way" (read, my way) of doing something. If the client will not budge, though, I generally will submit and follow the client's wishes. After all, I am here to serve the client and, unless it is illegal or unethical, ultimately I will give the client what he or she wants.
NOTE TO CLIENTS - To all you clients or potential clients out there, LISTEN TO YOUR LAWYER. You are paying me (a lot) for my expertise and experience. Believe it or not, it is possible that somewhere in all my schooling and my working in this area everyday that I know more about this than you do. If you ultimately decide that I don't know I'm talking about, then fine. But, at least think long and hard about what your lawyer tells you.
And lawyers, always make notes to your file regarding the advice given and the decision the client finally made. You will thank me for this later.
Well, not always. Sometimes the customer, or in my case the client, is wrong. As a lawyer, how much and for how long do you push back before finally giving in to a client's demands. This is a really tough question for a lawyer to answer, and inevitably, the answer is it depends.
Of course, if the client is asking you to do something illegal or unethical, then as a lawyer you stop it right away, or if the client insists, you break-off the engagement. But, I am not talking about that situation. I am more interested in the situation where your experience and judgment make it clear that there is a better way to do something, but the client still insists on doing it another way.
In my practice, this problem can evidence itself in many ways, but one of most common involves the drafting of trust language. For example, when creating a trust, the far better way to draft a trust that will last many years into the future (in TN this can be up to 360 years) is to make it as broad and flexible as possible. Because none of us has a crystal ball, it is impossible to know what the circumstances may be in the future, and we want the trustee to have the flexibility to deal with any situation that arises.
Clients, though, occasionally have their owns thoughts. And, sometimes, they want specific thresholds that must be met before a distribution can be made. Things like - graduates from college, has a job, earns $X from his or her own efforts, gets married, etc., etc. Also, the incentives can be negative - is not in jail or on drugs, etc.
Of course, as soon as you set-up these guidelines, you create problems. What if a beneficiary has special needs and cannot attend college. What is a beneficiary decides to be a schoolteacher or enter the clergy, both noble pursuits, but likely not financially rewarding. What if the beneficiary is not in jail or on drugs, but is a spendthrift and will blow any money given to him or her. And on and on.
Most times I explain this to clients, they agree, and we do it my way. Occasionally, though, the client is resolute. So, what do you do? My practice has been to make the best case I can as often as I can for the "best way" (read, my way) of doing something. If the client will not budge, though, I generally will submit and follow the client's wishes. After all, I am here to serve the client and, unless it is illegal or unethical, ultimately I will give the client what he or she wants.
NOTE TO CLIENTS - To all you clients or potential clients out there, LISTEN TO YOUR LAWYER. You are paying me (a lot) for my expertise and experience. Believe it or not, it is possible that somewhere in all my schooling and my working in this area everyday that I know more about this than you do. If you ultimately decide that I don't know I'm talking about, then fine. But, at least think long and hard about what your lawyer tells you.
And lawyers, always make notes to your file regarding the advice given and the decision the client finally made. You will thank me for this later.
Wednesday, June 15, 2011
Where Do We Stand Six Months Later?
Alright, so it's been a while since I last posted; things have been busy. But, it's summer now and I have more time. So, let's jump right in.
Last December, we estate planners got what we had long been waiting for - new estate tax legislation (if only for two years.) Back then, there was a lot of speculation regarding how this new law would change everyday estate planning for people. So, with that in mind, I thought it might be interesting to reflect back on the last six months to see what, if anything, has changed in my practice.
Here we go:
1. People are making taxable gifts to use up more of their additional $4,000,000 ($8,000,000 for a married couple) exemption from the federal gift tax. As most of you know, the new law increased the amount that can be given away during lifetime by a person without paying gift tax from $1,000,000 to $5,000,000. Because it is almost always better to transfer assets during lifetime rather than waiting until death, some clients are taking the plunge and making taxable gifts. The number clients of making taxable gifts (or at least considering taxable gifts) is significantly more than the last couple of years. But, it's not like everyone is doing it either.
One reason why it takes a little "courage" so to speak for those of us lucky enough to live in TN is that TN has its own separate gift tax. And, if a married couple decided to make an $8,000,000 gift, they would owe some $700,000 or so of TN gift tax (and that's a fair amount of change!). There are ways to potentially avoid this TN tax (like finding some non-TN assets to give away), but it requires some planning.
2. Planning for couples with retirement accounts is a little easier. More and more often, my clients' single biggest asset is a retirement account. Planning with a retirement account is extremely complex for married couples. In the past, to take advantage of both spouses' exemption from the estate tax, you often had to leave the retirement account to the bypass trust, which is fraught with peril.
The new tax act has brought us portability, though, and it is no longer (at least for the next two years) necessary to create a bypass trust at the first death (subject, of course, to all necessary disclaimers). This makes funding the bypass trust a non-issue and this type of planning much easier.
3. More Bypass Trusts for TN Amount. With the higher federal exemptions, fewer people need sophisticated federal estate tax planning. But, the exemption from the TN inheritance tax is still only $1,000,000 and there is no portability. Accordingly, it is still necessary for many married couples to establish a bypass trust at the first death to take advantage of both spouses' exemptions from the TN inheritance tax.
4. More of the Same. With the exception of the above, for the most part, nothing much has changed. For wealthy taxpayers, GRATs (and other estate freezes) and valuation still are the most important transfer tax issues we deal with on a day-to-day basis.
That is my update for today. More to come, I promise . . .
Last December, we estate planners got what we had long been waiting for - new estate tax legislation (if only for two years.) Back then, there was a lot of speculation regarding how this new law would change everyday estate planning for people. So, with that in mind, I thought it might be interesting to reflect back on the last six months to see what, if anything, has changed in my practice.
Here we go:
1. People are making taxable gifts to use up more of their additional $4,000,000 ($8,000,000 for a married couple) exemption from the federal gift tax. As most of you know, the new law increased the amount that can be given away during lifetime by a person without paying gift tax from $1,000,000 to $5,000,000. Because it is almost always better to transfer assets during lifetime rather than waiting until death, some clients are taking the plunge and making taxable gifts. The number clients of making taxable gifts (or at least considering taxable gifts) is significantly more than the last couple of years. But, it's not like everyone is doing it either.
One reason why it takes a little "courage" so to speak for those of us lucky enough to live in TN is that TN has its own separate gift tax. And, if a married couple decided to make an $8,000,000 gift, they would owe some $700,000 or so of TN gift tax (and that's a fair amount of change!). There are ways to potentially avoid this TN tax (like finding some non-TN assets to give away), but it requires some planning.
2. Planning for couples with retirement accounts is a little easier. More and more often, my clients' single biggest asset is a retirement account. Planning with a retirement account is extremely complex for married couples. In the past, to take advantage of both spouses' exemption from the estate tax, you often had to leave the retirement account to the bypass trust, which is fraught with peril.
The new tax act has brought us portability, though, and it is no longer (at least for the next two years) necessary to create a bypass trust at the first death (subject, of course, to all necessary disclaimers). This makes funding the bypass trust a non-issue and this type of planning much easier.
3. More Bypass Trusts for TN Amount. With the higher federal exemptions, fewer people need sophisticated federal estate tax planning. But, the exemption from the TN inheritance tax is still only $1,000,000 and there is no portability. Accordingly, it is still necessary for many married couples to establish a bypass trust at the first death to take advantage of both spouses' exemptions from the TN inheritance tax.
4. More of the Same. With the exception of the above, for the most part, nothing much has changed. For wealthy taxpayers, GRATs (and other estate freezes) and valuation still are the most important transfer tax issues we deal with on a day-to-day basis.
That is my update for today. More to come, I promise . . .
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