The Estate Plan

5) Wrong choice of executors and trustees
Naming a financial institution as successor executor/trustee after surviving spouse or instead of surviving spouse. In some cases this is to the detriment of the spouse and other beneficiaries because large institutions usually follow their fiduciary responsibilities with a less personable approach than another trustee could provide.
~Constance Stone, CFP, ATP; Stepping Stone Financial, Chagrin Falls, Ohio

6) Failure to address medical directives
Many attorneys will draft a health-care power of attorney (POA) and living will. If the two documents co-exist, they may conflict since the POA allows another to make decisions while the living will already states what is to be done. Absent statutory (or document) direction, health-care providers may experience a conflict in what to do.
~Michael C. Foltz, JD, CPA, CFP; Balasa Dinverno Foltz, LLC, Itasca, Ill.

7) Ignoring state estate and inheritance taxes
Many states follow the federal $5-million-plus exemption for taxable estates but the states do not always exempt this larger amount. For example, in New Jersey, estates over $675,000 that are not left to the surviving spouse are subject to a New Jersey estate tax.
~Martha Ferrari, CPA, CFP; Halberstadt Financial Consultants, Inc., Princeton, NJ.

8) Failure to address asset protection
Most couples fear losing their assets to nursing homes. For couples nearing retirement, strategies that protect assets should be explored. Strategies include lifetime credit shelter trusts, life estate deeds, gifting and other techniques that make assets available for use, but beyond the reach of creditors.

TOM ROWAN breaks down the mystique of estate planning

Tom Rowan, CLU, ChFC, CLTC, started his career with Prudential Insurance as an agent in 1977. After five years in production he spent 14 years in management. In 1996 he transitioned back to financial planning with Prudential under the DBA of Rowan Associates in Harrisburg, Pa. Senior Market Advisor recently asked Rowan for his insights on providing financial- and estate-planning services to clients.

Senior Market Advisor: How do you identify prospective estate planning clients?

Tom Rowan: I think there is a mystique about estate planning—everyone thinks that an individual or a couple has to have a huge amount of assets before they’d ever consider doing anything in the conservation of their estate or the management and distribution of their estate. I typically look at estate planning clients as individuals probably, from an age standpoint, around age 55 and above. They are either near the end of their careers or they’re already retired and they have a substantial amount of assets. The definition of substantial may vary but I would say at least in the range of $1 million to $2 million of assets and above. These clients are candidates to at least look at strategies to try to preserve their assets or to try to either maximize or manage their estates’ distribution.

SMA: What are the most common estate planning mistakes you encounter among prospects?

Rowan: The biggest mistake is that people don’t do anything at all. They feel that there’s always time. The worst plan is to take no action and then have something happen and then it’s like, oh, gee, I didn’t know. I’ve also found the main reason why people do not really address an estate plan is they don’t know where to go and who to trust. It appears that the higher the economic scale, so to speak, the more skeptical individuals are in trying to deal with professional advisors. And, hence, they just don’t do anything. Another mistake is that they put strategies in place maybe 10 years ago and think “I’ve already done my estate plan.” Tax laws have changed so many times through the years and the fallacy is that “I did this once 15 years ago so I don’t need to do it again.” Incorrect ownership of assets is another one. Individuals just plod along in a marriage and say, well, my wife and I own everything together. From an estate distribution strategy and trying to maximize transfers, that’s not good.

SMA: How do you motivate clients to implement your estate planning advice?

Rowan: I’m a fee-based planner. I find by charging that fee there’s a much better chance of the client implementing those strategies because they paid for them as opposed to not paying for them. Also, I ask them very early upfront for permission to stay in touch once I present the recommendations. If they agree to that I’ll routinely call and ask, “Did you contact the attorney yet? Do you want me to contact them for you?”—that kind of stuff. If they don’t put the legal documents in place that revolve around the estate plan then they haven’t done anything to improve the situation.

SMA: Do you believe it’s possible or advisable for someone who is new to the business to focus on estate planning?

Rowan: It is a little difficult for a brand-new person to come in from day one and say, all right, I’m going to be an estate planner. The information that a new person really needs to acquire in this area is substantial. A new person is not going to be learning how-to selling skills, if you will. The estate tax laws and the strategies surrounding those of various trust arrangements and so on are very technical in nature and it’s difficult for a brand-new person to come in and acquire that knowledge upfront. A better strategy is to try to partner with a senior producer or someone that has worked in these areas and actually learned the business, almost like an apprenticeship.