Have you listened to any good books on tape recently?
Neither have I, and yet I have not stopped using the term “books on tape” when referencing the audiobooks on my Audible subscription. My use of the term “books on tape” has caused no shortage of confusion with my children, who have never used a CD player, let alone a cassette player. Just as physicians and biologists are interested in determining what functional use a body part may or may not have, our firm attempts to identify aspects of a client’s estate plan that are only vestiges of the past; that is, anything that has no real current purpose and is just weighing down the clients and their advisors. Outdated (or “vestigial”) estate planning structures can take several forms, including: (1) outdated provisions within a client’s legal documents, (2) the investment or bank accounts owned by a client that no longer serve the purpose originally intended, and even (3) an outdated physical medium by which information is being held or communicated.
- Vestigial Provisions in Legal Estate Planning Documents
First, and most commonly, clients have outdated provisions in their current legal documents. A few common areas in which planning documents need to be updated include the following:
- Changes in Fiduciary Designations. If a fiduciary has moved, or if the client and the fiduciary have otherwise “grown apart” in a relational sense, the client needs to update his or her fiduciary designations. Every so often when I sit with clients to review their current fiduciary (key individual) designations, a client will note, “I don’t even know where they live anymore!”
- Outdated tax provisions. If your married clients last reviewed or updated their estate plan before 2009, your married clients should review what, if any, estate tax planning provisions are included in their documents. In light of changes in state and federal estate tax exemptions that have occurred since that time, these provisions likely need to be updated.
- Changes in the lives of a beneficiary. If a named beneficiary has divorced, died, or had children, a client should consider how their current plan should be revised in light of such an event.
- Changes in Charitable Objectives. If a named charitable beneficiary has merged with another charity, changed its mission statement, or even ceased operations, it is important that the appropriate revisions be made.
- Change in Ownership of Unique Assets. In some cases, clients want to treat certain unique assets they own (e.g., family business interests or a cabin) for special treatment among the beneficiaries. However, if in the intervening years circumstances have changed with regard to the unique asset or the family dynamic, is critical that these provisions be reviewed and updated accordingly.
- Vestigial Investment or Bank Accounts
A bank account or investment account may have been opened for a specific purpose (e.g., a vacation or educational savings account), but is now empty or is not currently being used for its original purpose. I recommend that the client close or consolidate such an account. Otherwise, if the account is kept open, the client’s fiduciary must track down information on the account following death. The existence of such a “vestigial account” makes the trust worse off than if the account had been closed or consolidated during lifetime. If clients wish to keep exhaustive records, I encourage clients to prepare a list of accounts that have been closed so that the fiduciary is made aware of the status of the account following his or her death.
- Vestigial Mediums of Storage
I still possess a floppy disk containing certain family history information that I collected back when I was in college. Obviously, that information is not going to be easily accessed. Likewise, if you or your clients are keeping important account information, passwords, or personal letters to family members on any form of media, keep in mind that it is not a matter of whether but when this particular medium will become outdated. The use of facial recognition and fingerprint scans, as a counterpart to passwords, will change how we need to deal with information in the future. If you keep information stored on any form of medium, you might consider a second form of recordkeeping (e.g., handwritten notes in a physical file).
When I first started practicing law, we encouraged clients to provide us with a friend or family member’s “land line” when it came to providing contact information. Would mobile phones be a passing fad? Because old habits are tough to break, and because clients “don’t know what they don’t know,” you provide a tremendous benefit to them by identifying potential issues with their overall estate plan, whether in the form of the legal provisions, the accounts they own, or even the medium of storage.