When estate planning is a standard part of the advice model, it’s inevitable that those clients will eventually pass away. Understanding the process that occurs is essential for participating in it, and for guiding the client’s family through a difficult time.
In general, advisors should follow these four steps:
- Step One: Call the trustee and find out what they need to assess acceptance
- Step Two: Call the family and explain the process and timing
- Step Three: Deliver necessary information to the trustee
- Step Four: Continue an ongoing dialogue until termination with both the trustee and the heirs
The first and perhaps most important step is determining who will be trustee, which sounds simple, but isn’t always. Being named trustee is really a nomination to the role. Even when named in the document itself, the trustee or successor trustee is not required to serve in the role unless and until they accept the role.
This is the first value of a professional trustee: honestly assessing whether they are the right choice, and being honest when they are not. This involves an examination of the documents, the assets, and the people involved. One might think, “It is a piece of business, and that is the business the trustee is in,” which is true, but the responsibility and liability of acting as a trustee run deep, and thus should be carefully considered, yet quickly determined, requiring the fast delivery of information to the trustee. All professional trustees should have a list of information necessary and a distinct process for making the decision to proceed. Once acceptance is achieved, there is much to do.
Communication with Family/Beneficiaries
The beneficiaries of the trust should be fully informed and have clear expectations set regarding the process. They should understand the document, the assets, the debt, and the approximate timing of the entire process so they are clear on what to expect. For many this is a difficult time emotionally, so understand that there’s a difference between talking business and challenging legal matters with the trustee versus with the beneficiaries.
It is important to be empathetic and understanding about the beneficiaries’ families and financial situations, so that as the trustee is doing their work preparing the assets for the heirs, the financial planning process is in full swing to prepare the heirs for the assets.
Deliver Information to the Trustee
Now the real work begins for the trustee, including gathering, appraising, investing, and distributing the assets, along with all the accompanying recordkeeping, reporting, adherence to specific state and federal law, and filing of tax returns. This all requires a team of trained professionals, each carrying out their roles and working in concert with one another. Taking the entire life savings and possessions of an individual and transitioning them smoothly to the desired recipients requires expertise in many areas of law, tax, and investments, thus necessitating a clear definition of roles and timing so that everything comes together smoothly.
Often one role – for example, investments – needs to be informed by another role, the trustee or accountant on tax status, liquidity needs, investment objectives, etc. Likewise, many postmortem elections on the tax returns require knowledge of the family situation and other variables perhaps not known to the tax preparer, yet known to the trustee or financial advisor. The team truly must function as a unit to carry out their respective roles. Communication is critical for everything to be executed correctly and so the grieving family knows their loved one’s wishes are being carried out – which leads us to the last step.
Continue an Ongoing Dialogue Until Termination with the Trustee and Heirs
The death of a client generally results in one of two scenarios. Either the estate or trust is set to pass all the assets out as soon as administratively possible – usually one to two years depending on the size and complexity of the estate – or the assets continue in trust for a defined period. This period may be until a beneficiary reaches a certain age, or a beneficiary passes away, or for generations in certain circumstances. All of this is based on the instructions of the deceased, yet it also defines the time for ongoing dialogue between the team and the heirs. Fiduciary standards dictate that at least annually the trustee should update the accounts to ensure that the investments match the needs of the beneficiaries within the objectives of the trust. Changes to the beneficiaries’ interests in the trust, and with regard to their own families and financial situations, continue to evolve over time, as do the financial markets and tax laws. It is imperative to maintain a robust and open dialogue among the members of the team, to do so on a schedule for efficiency, and to cover pre-defined topics to be comprehensive.
When a client passes away, it’s critical to immediately get the trustee the information they need to determine acceptance. From there, the professional trustee can carry out their role with an emphasis on keeping the heirs informed. Communication is the key to comfort in difficult times, and this is why the advisor with the closest relationship to the beneficiaries frequently becomes a center of communication, even when they are not performing the tasks at hand.
Leveraging Trucendent’s carefully curated network of estate planning attorneys and corporate trustees can help you remain central to the relationship with your clients’ heirs while giving you and the family access to deep expertise in the estate planning process. Learn more about how Trucendent works with advisors here.