Estate Planning: Attorneys and CPAs ' Perfect Together

Working together as a team, a law firm, accounting firm, insurance professional, and others will best serve individual clients, and through the process, generate additional referrals among the group.

Rick Hayden, CPA, and Spencer Barback, CPA, are partners at accounting firm Citrin Cooperman & Company, LLP (www.citrincooperman.com). Both are members of the firm's professional services practice, providing accounting and business services to law practices and other professional service firms. Barback is also a member of this newsletter's Editorial Board.

Whether or not a law firm offers its clients estate planning services, the input of a CPA is vital to ensure that a client receives the most comprehensive estate planning advice. Law firms without estate planning capabilities should work closely with accounting firms that do have estate planning expertise in order to realize an additional revenue stream from existing clients. Law firms don't need expertise in estate planning; all they need is the ability to ask their clients the right questions.

Law firms that do offer estate planning services to their clients should be consulting not only with the clients, but also with their clients' CPAs, as well. Unless these attorneys have the most thoughtful and detail-oriented of clients, they may be working without key information ' financial and otherwise.

An estate planning team can, and in many cases should, be comprised of not only attorneys and CPAs, but also insurance brokers, investment professionals, actuaries, and appraisers to ensure the creation and maintenance of a well-rounded plan.

Consider that most of the time, the marketing of estate planning services to an individual or family starts with a client's accountant. It's the CPA who sees the client regularly ' more so than the attorney or other professionals. The CPA has more opportunities to review a client's financial picture through the filing of income taxes yearly, and by working with him or her on other financial and tax issues. It is the CPA who truly gains a full understanding of the need for estate planning.

Estate plans, under normal circumstances, should be updated every three to five years. An accounting firm should inform the client's attorney if there have been any major life changes that would warrant a more immediate update.

Even when both attorney and CPA offer estate-planning services, the client benefits from the range of strategies and ideas presented by both. No matter whose ideas are ultimately adopted, law firms will always provide the valued service of drafting legal documents as part of the process.

An additional benefit of a tighter working relationship between attorneys and CPAs is the increased chance for future referrals. As baby boomers age, the estate planning workload should increase. The American Bankers Association estimates that over the next 20 years, approximately $17 trillion will be transferred, as one generation hands over its wealth to another. This transfer presents a great opportunity for both law firms and CPA firms to offer estate planning services.

Attorneys should view a client's accounting firm as an asset that can be leveraged when attempting to get clients to create or re-evaluate an estate plan. Consider that a CPA is often the client's most trusted financial adviser.

As CPAs who have provided accounting and business consulting services to law firms over many years, we have realized that attorneys and CPAs don't communicate enough about their clients in common. It's a shame, because attorneys (and their law firms) can leverage a CPA's knowledge.

Here is a typical scenario that illustrates how an attorney-CPA relationship can work:

A law firm with an estate planning practice has one of its attorneys set up an estate plan for a client and his wife. The plan calls for their assets to be split evenly between them. Over the next few years, this couple opens several new joint accounts. While this is great for the amassing of wealth, it can create an imbalance in estate planning. This situation can be averted if the client's CPA alerts the attorney to this fact so it can be remedied in a timely manner.

There are many events or actions undertaken by a client that could also trigger the need for an estate plan to be re-assessed, such as:

• An inheritance revealed to the accountant as part of the yearly income tax filing;
• Changes in financial circumstances such as second marriage, new children, grandchildren;
• Marriage of grown children;
• Major changes to a client's business, especially if it represents a major share of the client's assets;
• Changes in children's involvement in the business;
• Changes in beneficiaries on IRAs, 401Ks, or pension plans; and
• Changes in the financial circumstances or health of the client's children.

A Legal and Financial Document

While an estate plan, done correctly, can save the deceased's family and friends a lot of legal headaches, it is also important to understand that an estate plan is not solely for legal purposes. It is also created for financial purposes, only one of which is the consideration of taxes, requiring the services of an accountant.

As much as parents don't like to admit it, all children are not created equal. Some are healthier than others; some are harder workers. Clients may have a disabled child who requires a special needs trust. They may have a child who isn't able to work. They may have children with varying interests in the family business. Many of these cases require the skills of both an attorney and an accountant, and perhaps even an accountant with business valuation experience.

Down Economy's Challenges and Benefits

There's no doubt that the recession takes its toll on professionals in the estate planning industry. Potential new clients are reticent to plan as they see their assets drop. Existing clients certainly don't look forward to revising their plans based on the recent losses in the stock market, housing prices, and even the value of their businesses. Thinking optimistically, most want to believe the economy will eventually swing to previous levels, leaving the previous estate plan still viable.

Unfortunately, some clients may not live to see this; others will be surprised to find out that a recovered economy has reconfigured where the wealth lies. Some businesses may never recover to their previous values.

Again, it takes the combined efforts of a CPA and an attorney involved in the estate planning process to convince many clients to adjust their estate plans accordingly. Much like a tax attorney, the client's accountant will be able to provide trigger points, such as changes in tax law and specifically the Estate Tax (which is under review in Congress) that could create reasons for individuals to re-evaluate their estate plans.

Estate Planning As New Revenue Stream

For most small and mid-sized law firms without an estate planning practice, there is a great opportunity to work with an accounting firm to create additional revenue. Having an attorney on staff to prepare an estate plan without the proper training and experience is dangerous. Consider how complex the mission and the tasks can be: After reviewing a client's goals, assets, liquidity, contractual agreements (e.g., prenuptial agreements, business contracts, etc.), and other aspects of a client's life, an estate planning professional's role is to develop and evaluate a variety of strategies that are designed to fulfill aforementioned goals. An accounting firm with estate planning experience can carry a lot of that load, leaving the legal work to the attorney.

Some large law firms with estate planning practices have moved away from these services because of profitability issues. For many firms, though, a profitable practice can be established based on a strong working relationship with a CPA firm. In many cases, it can be as simple as asking the right questions to understand the clients' estate planning needs and partnering with a CPA firm to create and implement a plan.

Working together as a team, a law firm, accounting firm, insurance professional, and others will best serve individual clients, and through the process, generate additional referrals among the group.

Rick Hayden, CPA, and Spencer Barback, CPA, are partners at accounting firm Citrin Cooperman & Company, LLP (www.citrincooperman.com). Both are members of the firm's professional services practice, providing accounting and business services to law practices and other professional service firms. Barback is also a member of this newsletter's Editorial Board.