Annual Financial Estate Planning Review

Annual Financial Estate Planning Review

By: Martin M. Shenkman, CPA, MBA, JD

Annual Meeting a Must:

It is vital for every individual to have an annual estate, financial, tax and planning review. Just as you go to an internist for a physical check up once a year, and a dentist twice a year, you need to see an estate planner at least once a year as well. If you already meet with your investment adviser annually to review your investment performance, you're on the right path, but this is not enough. Even if your wealth manager has an attorney and CPA on staff, you must meet with your advisers as well. It is necessary to maintain the relationships and contacts so if an emergency arises all of your advisers are familiar with your circumstances. You want to feel comfortable with all of your financial advisers, so that if a situation were to arise, you would not feel embarrassed about approaching them.

Regarding your financial matters there are always loose ends which need to be tied and new issues which arise. An annual review will catch many of these problems and solve them for you before they become serious. The meetings which last for a few pain free hours a year could easily save many unwanted headaches and sleepless night. A well orchestrated annual review will solidify your understanding of your overall estate plan and make the complexity far more manageable. You may find the first comprehensive meeting to be a bit complicated, but future meetings will become progressively more efficient and beneficial. While the steps differ significantly depending on your personal situation, here's some of what could be accomplished during these meetings:

Coordinate Advisers:

You need to make sure all the components of your estate planning are coordinated. This requires many disciplines and professionals. Depending on your circumstances, any or all of the following advisers may be involved: accountant, investment manager, life insurance agent, property and casualty insurance agent, corporate attorney, estate planning attorney, pension consultant, etc. While an annual family board meeting with key family members and advisers is the optimal approach, in many cases the cost or difficulty of coordinating it is too great. With everyone having their individual busy schedules, a more realistic approach may be a conference call including some of the professionals involved. For example, you could meet with your estate planner and investment adviser and call in to your accountant, and insurance consultants. This latter approach is easy to coordinate and modest in cost, yet it is significant in benefit.

By assuring that each advisers has communicated with both you and your other key advisers, your financial planning will all be coordinated. This also gives each adviser the opportunity to request important documents which they need for their files. Often, creative ideas emerge from the interaction of your various advisers which would otherwise not have occurred. For example, instead of using two year rolling GRATs for estate tax minimization as proposed by your wealth manager, you may opt for the gift of LLC interests to a longer term GRAT to preserve asset protection issues your estate planner was aware of. Or, while speaking to each other, the advisors may come up with a plan that neither of whom thought of on his own. This combined effort from two or more of your advisors is only beneficial to you.

Crummey Powers:

Certain irrevocable trusts contain a provision that appointed beneficiaries, after signing a notice (crummey power), may withdraw gifts that you make to the trust. These notices are essential so that gifts to trusts will qualify for the annual gift tax exclusion $12,000/donee. Gifts to trusts can be reviewed, and all Crummey powers prepared and signed at your annual meeting. If all signers are not present, those that are present can sign, and someone at the meeting can be designated to obtain the remaining signatures. By the following meeting all the signatures should be collected.


Every family and closely held business entity can have a formal meeting as part of your family's annual meeting. Minutes can be prepared and signed for each corporation. This may even include LLCs. As part of signing minutes, other business entity matters can be reviewed to be certain that they are addressed. For example, your family LLC leases real estate to your family manufacturing business. This meeting would give you the opportunity to verify that the lease is still valid, and if not, renew it. You also may confirm that the rent is arm's length, or designate someone to obtain a report of an independent broker as to the fair rent.

Annual minutes and other formalities support the validity of your entities, in the event of an IRS or creditor challenge. If you have both a corporate, and estate planning attorney, coordinate who is responsible for which action. You can organize your business annual meeting to proceed or follow your personal/family annual meeting to make the process as efficient as possible. These quick meetings can legalize your situation, and clear up small lose ends within your financial issues.


As plans become more complex, it becomes more important for you to track all gifts to your various trusts, 529 Plans, etc. to determine if you have exceeded the $12,000/donee annual gift tax exclusion. An annual meeting is an ideal time to compare current year gifts with previous year gifts, confirm current year gifts, plan next year's gifts, and decide with your advisers whether a gift tax return should be filed.


During your annual meeting, you should review investment policy statements for each entity and investor. If you have a family FLP (family limited partnership), it should have a separate investment policy statement documenting its investment goals. Reviewing these goals also makes it an ideal time to call your accountant to be certain that your wealth manager has the correct information and assumptions as to the tax status of each entity, trust and family member for whom they are investing. You should also review the allocation of assets between the various entities. For example, assets more likely to appreciate might best be held in a bypass trust, and assets generating income in a marital or QTIP (qualified terminable interest property) trust. However, if all the various trusts consolidate assets into a single LLC (limited liability Corporation) for investment efficiency, the investment planning for that LLC should address the needs of the underlying trusts.

Notes and Loans:

Be sure that any intra-family loans are supported by written loan agreements and adhere to all formalities of repayment. If there are covenants, the lender should confirm that they are being met. Although situations may become uncomfortable, you want to ensure your financial stability, and guarantee that you will receive all funds owed to you. Also, in the unfortunate event of the death of that family member, you will want written proof of the loan.

Retirement Plans:

If your plan received an IRS determination letter confirming tax exemption, this should serve to insulate your plan in the event of bankruptcy. At your annual meeting, be sure to review that you have a copy of the plan's determination letter. Review and coordinate beneficiary designations to be certain that they are current.

Life Insurance Trusts (ILIT):

Verify that the ILIT bank account is in the correct name and tax identification number, making sure that the insurance policies intended to be held by the trust are, in fact, held by the trust. Then, obtain an in force illustration of the policy and have the insurance agent review it. You want to make sure that you have exactly the coverage that you thought you had. Verify the economic status of the insurance company, to ensure that it is stable and will be in existence when you need it.

Property and Casualty Coverage (P&C):

Too often P&C is ignored in planning. If your estate planner and accountant restructured assets as a result of a gift program, formation of a new trust, or LLC, your P&C coverage must be reviewed. Check to be certain that the correct owners for each asset are listed, that the risks are properly addressed, etc. Trustees may need to be named insured. In some cases, coverage that is no longer needed can be dropped for significant savings. You should obtain a summary of all coverage in advance of the meeting, to make sure that each owner/trustee is listed with the correct asset.

Trust Administration:

In the first year you become a trustee, you should review the terms of the trust with an estate planner, and list the responsibilities you have and key steps you need to take. At least annually, thereafter you should review the operations of the trust to be certain you are complying with the terms of the trust. Crummey powers and investment issues, as noted above, are only some of the matters which need to be reviewed.

Call your accountant to be certain that the correct positions are being taken on the trust's income tax return. Review distribution matters with your investment adviser. Discuss communications with trust beneficiaries. A report to beneficiaries can be developed at your annual meeting. If a particular trust is intended to be taxed as a grantor trust (you as the grantor pay income tax) the mechanisms used to create grantor trust status should be reviewed and perhaps used. For example, if you are in part relying on the fact that the trust can use income to pay for insurance on your life, have the trust buy a small policy to implement that power.

Buy-Sell Agreements:

A common technique for many closely held businesses is to set an agreed or stated value that will govern any buyouts of the business. Most of these have sunsets, so that if the figures are not revised periodically the buy-out defaults to some type of formula instead. If one were to set an agreement in the early years of a business and not change that agreement until it was time to sell, then they will lose out on a lot of profit. An annual meeting is an excellent opportunity to update and sign a new Certificate of Stated Value. You should call the business insurance agent to verify the performance and adequacy of the insurance coverage for the buy out.


Many steps can be taken at an annual meeting to ensure your estate is well planned. The various proceedings necessary will vary depending on your personal planning situation, but failing to have a regular meeting and following up on all the administrative details will almost assure the failure of your financial success.

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