The estate planning recommendations have been accepted. Wills and trusts have been drafted. Life insurance has been placed. Fees and commissions have been paid. Another successful estate plan has been completed, and the client has been served. Right? Wrong!
In estate planning, the devil is in the details. Below are four examples that prove even when you think a job may be complete, there are double-checks to be done.
Case One: A client asked me to review his existing estate plan and life insurance. I found inconsistent ownership and beneficiary designations. There were no Crummey notices, and premiums were being paid by the insured/grantor directly to the life insurance company.
Case Two: An attorney requested my opinion regarding an existing estate plan, buy/sell and split dollar agreements, and existing life insurance for a new client. Surprisingly, trustee inconsistencies and buy/sell and split dollar issues showed up again.
Case Three: A new client wanted to add additional second-to-die life insurance to his existing irrevocable life insurance trust (ILIT). I knew the client, and knew that he paid attention to detail. Gifts were being made to the ILIT, and the trustee was paying the premiums.
This solution was an easy one. I called the attorney to find out the exact name of the trust, the date and the identification number. There was no existing second-to-die ILIT. Instead, two individual trusts had been drafted, and already existing
individual policies were to have been transferred. That wasn’t done, however, and now there is a second-to-die policy in an ILIT that was drafted for an individual, single life policy.
Case Four: An accountant acted as trustee for an ILIT that has a split dollar agreement with a closely held corporation on the life of the majority shareholder. The CPA/trustee was responsible for sending out the Crummey notices and did so — except that the amounts were wrong. The notices reflect the whole premium being paid, not the Table 2001 rates or the insurer’s term rate.
The common theme in each of the situations described above is that mistakes were made even though competent professionals were involved. How do competent, reputable, good professionals find themselves in these circumstances? Whose fault is it that these things happen? Who is liable — the attorney, the accountant, the life insurance agent or some other advisor? I’m not talking about legal liability. I’m talking about moral, professional and ethical liability.
Clients are paying for solutions to their problems. They are paying for results, yet some advisors say the clients are the ones to blame when something goes wrong. Creative planning is much more fun than the actual drafting of documents, arranging for notaries and witnesses, etc. I know that checking ownership and beneficiary designations and making sure the Crummey letters are sent are not nearly as exciting as designing and underwriting the life insurance solution. However, it is the attention to detail that makes it all work. It is where the rubber meets the road, where it all comes together.
It is in the inglorious, plodding work of implementation that we serve our clients and demonstrate our care and concern. It is in the mistake-free implementation of our recommendations that we keep the promises we made to the client in the initial meeting — when we were “selling” ourselves and our services. We are talking about promises being fulfilled by performance, by our doing for the clients what we said we were going to do. That is integrity and professionalism — the ethics of implementation.
What is the answer? It is a change of attitude, a paradigm shift. It is moving away from the notion that responsibility for and commitment to the client can be divided, e.g., if there are four advisors working for the client, then each is 25 percent responsible. That’s not good enough. Ethical advisors know that each of us is 100 percent responsible for our client and the proper implementation of the plan. None of the advisors should sleep at night until all the i’s have been dotted and all the t’s have been crossed.
When flawless implementation has been achieved, then the client has been served and we, the advisors, prove our care and concern, and showcase true professionalism at our ethical best.
Albert Gibbons specializes in estate planning and life insurance planning for high-net -worth individuals, high-level corporate executives and successful entrepreneurs. He is a Life Member of the Million Dollar Round Table and the Top of the Table. Albert may be contacted at firstname.lastname@example.org.