Verification and Coordination When Estate Planning

Mar 01, 2016

Pennsylvania CPA Journal

CPAs certainly have an intimate view of their clients’ financial information when preparing their income tax returns. Through this work, even CPAs who do not consider themselves financial planners may be privy to information that could impact a client’s estate plan. Rather than working in a bubble, CPAs who reach out and help their clients verify their information and coordinate with other engaged professionals will elevate their level of service, client engagement, and the trusted-advisor relationship.

Relevant information to review includes net worth, cash flow, retirement account holdings, asset titling, beneficiary designations, and powers of attorney. The professionals involved in estate planning include the CPA, attorney, insurance agent, and investment professional, all of whom should work together on the estate planning needs. Calculating the net worth of a client is not enough. An inventory of assets, titling, beneficiary designations, liabilities, cash flow, and current estate documents needs to be gathered and understood. Make no assumptions. Each professional will have a part in the proper implementation. The value in the planning is verifying the proper execution.

Many people believe their will directs the disposition of their assets, even when they understand that they have joint accounts or designated beneficiaries on retirement accounts and life insurance. Accounts that are designated joint ownership with rights of survivorship, transfer or payable on death accounts, and designated beneficiary accounts pass directly to those named. Joint accounts, other than tenants in common, may still be included in full for estate tax purposes and subject to tax. There is a presumption that a joint account is fully includable unless the representative can demonstrate contribution from the other joint owners. Most wills direct that the death taxes on the entire estate will be paid from the residuary estate, even when nonprobate assets are not included in the residue. Without understanding this estate planning principle, a residuary estate beneficiary may bear the burden of the estate tax without having the benefit of those assets.

Techniques to mitigate estate or inheritance tax involve the use of trusts, asset titling, life insurance, and life insurance trusts. Trusts can further assist in the administration of foreign assets outside the resident state or for financial management for survivors. A proper power of attorney allows lifetime planning in cases of incapacity or incompetency. Additional strategies include postmortem planning options using disclaimer provisions in the documents or proper contingent beneficiary designations. About 50 percent of people do not have estate documents, and therefore do not have the tools or options available that those who planned have.

Even so, much of estate planning lands outside the documents. The life insurance agent sets up the life insurance, the investment advisor coordinates the asset titling and beneficiary designations of the investment accounts, and the client establishes the titling of real estate, personal property, and bank accounts or self-directed investments. The CPA is expected to manage the taxes, which requires coordinating and understanding the plan. A place to start is an inventory and verification of the assumptions.

The inventory should be dated and should include asset values, ownership registration, property location, associated liabilities, life insurance policy types, terms, beneficiaries, and contingent beneficiaries and their relationship. Secure copies of estate documents for further review and a list of associated professionals engaged. In addition, document the ages and ability of survivors to receive and manage inherited assets. Develop a flow chart to illustrate the value of the estate, potential death taxes, and resulting dispositions so that the client understands the value of the assets passing, to whom they are passing, and how they are passing. After reviewing with the client, coordinate with the other professionals to bring about beneficial strategies that implement the desires and outcomes the client expects.

Anticipate unforeseen circumstances as well. Understanding cash flow and family dynamics will enhance estate plan projections. Further planning will be required for long-term care, special needs, potential divorce, and generation-skipping strategies or spendthrift provisions for spouses, children, or grandchildren. Communicate to clients that proper planning allows flexibility and options for their representatives when unforeseen estate issues may arise.

CPAs are on the front line in getting a client to work with an attorney in drafting estate documents and implementing a plan. CPAs involved in estate planning should have a thorough understanding of advanced techniques in planning, including using marital, qualified terminable interest property, bypass, and irrevocable grantor type trusts. Becoming involved with local estate planning councils provides opportunities for both education and professional networking with those involved in estate planning.  

Laurie A. Siebert, CPA, CFP, AEP, is an investment adviser representative of Valley National Advisers Inc. Securities are offered through Valley National Investments Inc., member FINRA, SIPC. She is a member of the Pennsylvania CPA Journal Editorial Board, and can be reached at
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