The intake intricacies involved in estate planning for couples

The intake intricacies involved in estate planning for couples

The intake intricacies involved in estate planning for couples

While financial plans are ideally created to suit the needs of an individual, advisors know that a long-term, lifelong plan often isn’t so simple. In particular, planning for clients in a committed relationship requires a consideration of both partners’ circumstances and outlook.

That also applies to the question of estate planning, which often requires a nuanced intake process. Aside from deciding whether they can meet a particular prospect’s needs or issues with the prospect that suggest they should be rejected, an advisor who meets with two clients may even need to decide which one they should work with.

“Any dissent between a couple who come as prospective clients may lead to the advisor only being able to represent one of them,” wrote Sandra Glazier and Martin Shenkman of Trusts and Estates magazine in a piece for “The advisor should attempt to facilitate an honest discussion, and if one of the parties is hiding something from the other, this can be troublesome.”

An advisor who represents a couple may find their hands tied when the best advice for one partner is adverse to the interest of another, which is particularly true in cases of significant conflict. To pre-identify such issues, Glazier and Shenkman recommended that advisors perform early vetting, obtaining some relevant information from the first prospective client who approaches before meeting their spouse. “A waiver letter can really help the client understand so she can make an informed decision,” the pair said.

In regard to nonreciprocal spousal lifetime access trusts (SLATs), which each partner sets up with the other named as the primary beneficiary and thereafter descendants, Glazier and Shenkman noted that such planning tools generally shouldn’t be mirror images. To avoid the so-called “reciprocal trust doctrine,” each SLAT instrument should lay out different rights and benefits, meaning each party may not be treated equally. That makes it advisable to clarify, in writing, that the SLATs will differ to represent varied interests and not violate reciprocal trust provisions that could lead to unintended consequences.

“Importantly, to use exemption and accomplish the clients’ goals, these trusts are irrevocable,” the pair said. “Clients should be advised that they may be giving up rights to what would otherwise be assets under their control.”

One other possible route is to use a “floating spouse” provision: rather than specifically naming the spouse beneficiary, the generic term “spouse” may be used to allow benefits to go to a subsequent spouse. In other words, whoever the client is married to at the time of their death will be the beneficiary, and the trust will be accessible to that person as well.

“If one spouse is uncomfortable with this kind of provision, a separate engagement may be required, or perhaps, an additional disclosure confirming the impact and advising the couple as to the scope of the advisor's involvement,” Glazier and Shenkman said.

In such a case, they said, an advisor may be able to represent just one spouse; at the very least, the other may be advised to hire their own independent counsel.


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