The Wealth Counselor
Helping Clients Create an Up-to-Date Inventory
If your client has already done estate planning by creating a will or trust, then the client has taken a very important step toward ensuring that if the client becomes incapacitated or dies, the client’s loved ones will know how to help manage the client’s financial and legal affairs. However, simply having a will or a trust and related estate planning documents is often not enough. An inventory of all of the client’s accounts and property is crucial for helping the client’s loved ones manage the client’s affairs effectively.
Most estate planning attorneys have received calls from distressed children who know that a deceased parent had a will or a trust, but have no idea what accounts, insurance policies, or items of real and personal property the parent owned. If an inventory was never prepared and shared with the parent’s attorney, the child likely had to spend countless hours meticulously combing through the parent’s file cabinets, drawers, tax returns, and online accounts to identify what the parent owned.
Needless to say, this is not something that anyone wants to happen. Even if a client has not started or completed estate planning, there is no need to wait to prepare an inventory of the client’s property until these legal documents are created. In fact, assembling an inventory can be an excellent first step that encourages a client to begin the estate planning process. This preliminary effort will allow the client to walk into an estate planning attorney’s office and almost immediately begin to focus on creating a will or a trust that takes into account each of the client’s items of property and how they should be coordinated with the client’s estate planning goals. With a complete and accurate inventory in hand, there is little doubt that your client’s attorney will be impressed and grateful for the effort.
Even if your client never gets around to creating a will or trust (of course, this is strongly recommended), a complete inventory of the client’s property will at least help the client’s loved ones quickly identify the property the client owns and the next steps they will need to take in order to gain control of the property and distribute it according to state law. This step alone will significantly reduce the time and costs of administering a client’s estate in the probate courts. And anytime that you, as the advisor, can help a family bring order to chaos, you will increase their trust in you and lay the foundation for future business opportunities with the client’s loved ones and those they may refer to you.
How to Create an Inventory
Of course, this is just an example of what an inventory could look like. The client should include any information that may be helpful to someone who is put in charge of collecting the client’s property after death or disability. The client might also include more details beyond what is shown above, such as where the property is located or even the property’s acquisition value to establish tax basis on the property. For example, if the client keeps certain items of jewelry in a safe, or the client’s boat is stored in dry storage, this would be crucial information to include.
Probate and Your Property
Probate can be an expensive, time consuming, and very public process that most people would rather avoid. This is why preparing an inventory well before a client’s death can alert the client to those items of property that will require a probate so that the client can take steps, while still able, to transfer ownership or retitle them in a way that helps the family avoid probate. This might include making sure a beneficiary has been named or establishing a trust into which certain property can be transferred.
Additional Benefits of a Complete Inventory
What to Do with the Inventory Once Created
Once your client has created and shared the inventory, the client should create a plan for updating. Over time, accounts get closed or consolidated with other accounts, property is sold, stocks get converted to cash, and retirement accounts get depleted. If a client fails to regularly update the inventory, there is a chance that an old inventory could create confusion and send you or the client’s loved ones down rabbit holes as you try to handle your client’s affairs. Assisting your client with this process can also help you discover accounts and assets that you could help them manage, consolidate, and simplify, thereby benefiting both you and your client.
Some people find it helpful to choose a specific date each year when they will review and update their inventory and also their estate planning documents. Whatever will work best for the client should be a part of the plan. The client should then implement the plan and stick with it.
Helping your client understand the great value that can be created through a simple but critical inventory will be a significant value-add that you can provide to the client and the client’s family. And when clients and their families benefit from such effort on their behalf, you can be confident that your business will continue to grow and prosper for years to come as multiple generations seek your professional advice. If you have any questions about how you can help your clients create and maintain an inventory, feel free to give us a call.
Law Offices of J.R. Hastings • 1003 Third Street, San Rafael, California 94901 • 415-450-6692