Many clients maintain investment accounts in multiple banks or brokerage firms. They may be seeking privacy or the comfort of insurance from the FDIC. Consolidation offers benefits such as simplifying location of assets. It also saves heirs from a time-consuming hunt for scattered assets after a client dies and may lessen wash-sale concerns.

One spouse often has significantly more assets than the other. That may happen if he or she comes from a wealthy family, has a high-paying job or is substantially older and has accumulated assets over a lifetime. An equitable balance of non-retirement assets between spouses is advisable for tax reasons. Illinois, for example, levies an estate tax on assets over $4 million and there’s no portability. Balancing assets between spouses could help avoid or minimize some taxes.

Holding assets in joint tenancy in some situations makes sense. In others, it can be problematic. Imagine a scenario in which a parent names a child as joint tenant on an investment account. The joint tenant child could decide to keep assets the parent may have intended to be shared with siblings after death. Even joint tenancy between spouses can create troublesome issues after a partner dies. 

Investment real estate is a common asset in many portfolios. To reduce risk, it should be owned through an entity such as a limited liability company or LLC. This configuration offers legal protection to the client and their family in the event of accidents on the property.

If a client has funded grantor retained annuity trusts (GRATs), carefully monitor the performance of the assets inside each GRAT. If assets have appreciated significantly, swapping those assets out for less volatile assets such as cash can lock in the gains of a successful GRAT.

Also, be alert for opportunities to arbitrage state income taxes with your clients’ grantor trusts. For example, your clients may live in a state with no income tax, but perhaps their child lives in a high-income tax state. If assets are gifted to the child, earnings on those investments are likely to incur state income tax. Encourage your clients to create an irrevocable trust taxed to the clients for the benefit of the child. This allows the child to enjoy the investments and avoid state income taxes.

This is unglamorous but necessary work with significant financial consequences. Unrealized gains or losses in a client’s portfolio are important to manage carefully, especially if assets are held in an irrevocable grantor trust sometimes called a SLAT or IDIT. Assets in these trusts often can be swapped in or out for other assets owned with the same value but a different basis. Because these trusts are excluded from the client’s taxable estate, their assets do not receive a step-up in basis when the client dies. Thus, a client in poor health would benefit from exchanging high basis assets, such as cash in a brokerage account, with low basis assets in the irrevocable trust.

Family-owned businesses can generate substantial wealth, but they are often quirky and, worse yet, disorganized when it comes to succession planning. That’s a vital but exquisitely sensitive topic to navigate especially if only some of the children are active in the business.

Philanthropy offers financial benefits such as income tax deductions. Donating stock to reduce overweight equity positions may be a better option than writing a check. Urge active philanthropy. Too many people gift from the grave and miss out on the joy and satisfaction of giving. A thoughtful program also may foster a family culture that values education, science or the arts over baubles and toys.

For example, donor advised funds, or DAFs, have exploded in popularity in recent years. But they have some limitations and thus are often best employed for smaller philanthropic purposes. A private foundation may be a better alternative for gifting. DAFs’ median value is about $200,000 while private foundations are larger, typically funded with over $1 million. Sometimes, both are necessary.

Married individuals typically name their spouses as primary beneficiary and children as contingent beneficiaries of their retirement accounts. That might not be appropriate when children are young. Even when children are young adults, you may question the prudence of giving them unfettered access to a large retirement account if both parents died. Beneficiaries should be chosen with a skillful grasp of the tax code. Mistakes can be costly and harmful to heirs.

Most clients would rather endure a root canal before reviewing estate plans, but even minor events can upend a carefully crafted plan. Major events such as a change in health or domicile should prompt a review as soon as appropriate. Nudging clients to undergo regular checkups with their estate attorney will pay substantial dividends in the long run.

Financial advisors typically stay in close touch with clients and are aware of intimate issues such as health problems long before clients’ lawyers or accountants. That effectively means the financial advisor may need to take the lead with the clients’ team of financial and legal professionals during a crisis. When done professionally and discreetly, that kind of service is invaluable to wealthy families. 

If the client’s child is getting married, ask if there’s a prenuptial agreement. Have your clients set up creditor protective trusts for their children? Having estate plans and prenuptial agreements in place is the equivalent of seatbelts and air bags in a car crash. Protection doesn’t guarantee survival, but it increases the odds.

A financial advisor should be a sentry, watching for issues that may arise when clients have interests in more than one state. Even clients with well-crafted estate plans can muck up the works with an impulsive decision, such as buying a second home in a tax-hungry state.