Top estate planning mistakes for practitioners to avoid.

Because the adviser is held to a high standard, the consequences of a mistake can be as severe to the accountant as those visited on the client, particularly when the client becomes aware of the lost opportunity.

Common Errors

1. Failure to plan in time. Many clients who are not at all hesitant about saving income taxes shy away from any estate planning, often as a way of avoiding the reality of their own mortality. Broaching the subject of estate planning is often what the client needs to address the issues. Clients need to be reminded that they incur needless taxes not because they plan to fail, but because they fail to plan.

2. Failure to monitor after a plan is put in place. Estate planning is not a cookie-cutter procedure, and the client's objectives are likely to change in response to changes in familial relationships and economic circumstances. As a client has grandchildren, as children marry and divorce, as disease or illness becomes a new reality, an earlier plan may no longer meet the goals of the situation. Inheritances, successes in business, appreciation in investment assets, and increased retirement benefits may also combine to present different planning situations even when the family circumstances remain steady.

3. Failure to educate the client sufficiently to enable the plan to operate in fact the way it should. This is particularly necessary in areas where the law is uncertain or undergoing change. Recent developments in family limited partnerships is a classic example of a situation in which a client who is given limitations on the amount of benefit that can be retained in the partnership would have fared better. "You never told me that ..." is the opening sentence to at least a professional embarrassment and possibly a call to the E&O carrier.

4. Failure to review the ownership of assets both for estate-planning purposes and asset protection both for the client and the beneficiaries. Clients often have too much property titled in joint names, which can leave few alternatives if the wrong spouse dies first. This is related to the error of assuming everything will "follow the book" in an expected fashion, and the failure to anticipate the non-normative. The overabundance of jointly held assets makes optimal funding of a credit shelter trust difficult, if not impossible.

5. Failure to provide for contingencies. Flexibility is especially called for in times where it is uncertain whether there will be an estate tax, whether the estate tax will disappear for one year and reappear with higher rotes in the future, whether there will be exemptions for family businesses or any of the other proposals currently being debated. But since one has to go with what one knows, the current law that provides widely differing applicable exclusion amounts that fluctuate depending on the year of death requires looking closely at different strategies. This is related to the failure to monitor the situation after the plan is put in place and the failure to provide for the predeceasing beneficiary.

Surgent McCoy CPE, LLE 

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