About nine years ago one of my clients went to an attorney for an estate plan. I asked to be involved and was told I wasn’t needed so I sat it out.
The attorney was one of the top drawer firms with a noted estate planning expert who was going to be the lead attorney on the project. An impressive letter was prepared laying out everything the firm recommended, and the client gave the go ahead. I was not shown or told anything.
A few months ago the client was very ill and his wife asked me to review all of the plans. I was given the 2008 letter along with all of the documents—the wills, grantor and living trust documents, power of attorney and other agreements. I also asked for all of the life insurance policies, pension and IRA account balances and beneficiary designations and an approximate value of the art and jewelry. As the family’s accountant I had access to information about the other assets and liabilities.
After reviewing everything, I could not believe the completely incompetent job the attorney did. Here is a short list of some of the omissions or errors:
1. No financial statement was prepared by the attorney when they did the estate plan so they did not have any idea of the total assets and where they were situated and how they were titled.
2. The pension and IRA assets and beneficiary designations were not requested or referenced.
3. A very large life insurance policy was sold to the client by the attorney after the documents were executed, and the policy’s beneficiaries were inconsistent with the plan, will and trusts.
4. Nothing was done to transfer assets to the grantor and living trusts. We were not made aware of the trusts at that time and the attorney did nothing to implement his recommendations.
5. Provision was made in the documents for a credit shelter trust, but the wife had minimal assets in her name. The 2010 law creating portability would have remedied this to some extent if she died first, but this was totally negligent by the attorney, and the credit shelter trust would be a better way to handle this. Also portability did not exist when the estate plan was done.
There is a lot more, but I think I have illustrated enough to make my point. Now I have a question for you, my colleague. What should I have done?
I was very persistent, but the client was clear he didn’t want me involved and did not want to incur the additional fees (which at the time would have been about $10,000). Note that the attorney’s fees ended up at around $35,000 plus the commission on the insurance policy (which I estimate was about $100,000). Also note that the attorney said they would do the annual gift tax returns and we were not provided with copies. The only gift tax returns that were filed were for the life insurance premiums.
The client did not give me any of the documents. I asked when the project was completed and the client repeated that it was taken care of and he did not wish to pay me for something that was done and finished. While I felt it was important for me to review them, I did not feel a responsibility to keep insisting that I do, so it became a nonissue. I did periodically ask if I could review them and suggested updating the plan, but the client always said no. I even had the client sign a short note that he declined to engage us to review the estate plan.
Nothing ever happened until the wife got me involved.
My point here is that we can be very effective advisors and we, as a profession, care strongly about our clients. However, we cannot spend their money. We can make recommendations and suggestions, give warnings and whatever else we can do to persuade them to engage us for these additional services, but at the end of the day it is the client who decides what they want to buy and how much they want to pay.
We do our best, but sometimes it might not be enough, or it might be that in a given situation, there is no way to change the client’s mind. But we have to put it aside and move forward with what we do. If there are regrets, it is the client who will have them, not me.
Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or firstname.lastname@example.org.