The most critical information you'll gather during client interviews relates to who gets what when clients die. This seemingly straightforward inquiry requires careful investigation to protect both your client's wishes and your practice.
Drawing from insights shared in our 'Client interview best practices part 3' (available in our webinar library), this guide provides essential tips and best practices for conducting thorough asset and beneficiary investigations.
Investigating the family landscape
As outlined in that article on client interview best practices, collecting information about family members is essential. Key details to gather for each family member include names, ages, residency, and citizenship. A crucial consideration is whether to use class descriptions (e.g., "my children," "my grandchildren") and whether to include future class members.
This consideration is particularly important for clients with young children, as defining terms like "children" to include future members requires specific legal language.
Documenting difficult family dynamics
When gathering beneficiary information, estate lawyers should also pay particular attention to special circumstances affecting distribution decisions. Courts typically expect spouses and children to be provided for, making documentation of exceptions particularly important.
Document with special care:
- Estrangements from family members: Documenting these situations carefully. Courts examine wills that deviate from normal expectations (such as not providing for children). Identifying estrangement early allows for thoughtful discussions—whether the client wishes to include or exclude the estranged person. In either case, a well-documented rationale helps prevent future legal exposure.
- Special needs or disabilities affecting beneficiaries: Knowing about a beneficiary's disability is crucial, even if discretionary trusts or disability planning are not ultimately used
- Prior financial support or gifts already provided: Knowledge of previous financial distributions to individuals can lead to different planning discussions.
- U.S. citizenship or foreign residency issues
- Potential dependant support claims: Living with or receiving support from the client (even rent-free housing) can create legal obligations and potential dependant relief claims after death. This includes common law relationships, married spouses, and other support obligations like those to ex-spouses. Even small gestures of support can establish these claims.
For any beneficiary receiving less than might be expected, clearly record the client's reasoning. This contemporaneous evidence becomes invaluable if the will is later contested.
Visualizing the family tree
Consider incorporating visual tools like family trees and graphic summaries in your process. These visual aids serve as powerful verification tools, often revealing information clients might otherwise forget to mention. It also ensures the lawyer is not caught off guard during cross-examination by unknown relationship details, such as a person not being the client's child but the spouse's.
The most effective interviews balance thoroughness with efficiency. Gather information in advance when possible, then use in-person time to confirm details and explore complexities. Always conclude this portion of your interview by asking: "Is there anything we're missing?"
Investigating the asset landscape
Gathering information about assets is essential—you can't evaluate an asset's importance until you know it exists. Failing to ask about assets can create significant issues. While some clients provide extensive details, you don't always need granular information like every bank account number.
The fundamental question of ownership
For every asset discussed, one question takes precedence over all others: Who owns it? This basic truth—that clients can only give away what they own—forms the foundation of effective estate planning. Yet clients frequently misunderstand asset ownership, creating significant planning pitfalls.
Common ownership arrangements requiring verification include:
- Sole ownership by the client
- Joint ownership with right of survivorship
- Partial ownership as tenants in common
- Ownership by a trust or corporation
- Beneficial ownership versus legal title
Real estate: When title searches become essential
For real estate, lawyers cannot merely accept a layperson's understanding of ownership without warning the client or conducting verification. While not always strictly required, a title search is strongly recommended. Lawyers should offer to verify ownership for clients and document if the client declines this service.
Here are some key reasons to conduct a title search:
- When real estate is specifically gifted in the will. A title search provides accurate property descriptions and may reveal related assets like parking spaces or storage lockers that clients may have forgotten.
- When the property might qualify for a first dealing (e.g., if held since before 2000).
- To confirm ownership status, particularly when clients claim joint ownership. Without verification, the asset could unexpectedly pass through the estate and incur probate tax, even if it reaches the intended beneficiary.
If clients decline title verification, document this decision in your reporting letter. Note that you offered to verify ownership but were instructed not to proceed.
Handling specific asset types
For life insurance, policy numbers are essential when making beneficiary designations. Unlike registered plans, which can be referred to generally, insurance contracts require specific identification.
Watch for corporately-owned policies where clients mistakenly believe they control the beneficiary designation personally. Ownership remains the crucial factor—if you only have one minute to assess an asset, focus on who owns it. Mishandling life insurance can result in unintended beneficiaries receiving the asset and trigger unexpected tax consequences.
Private Corporations: It's crucial to understand both who owns the corporation and what the corporation owns. A common planning mistake occurs when clients attempt to give away assets owned by their corporation rather than by them personally—this creates significant complications.
By thoroughly investigating family dynamics, special circumstances, and assets—with particular focus on ownership and documentation—estate lawyers can provide more accurate advice, mitigate risks, and add significant value for their clients. This detailed information gathering provides the essential "X-ray" needed to fully understand the client's situation.
eState Planner is designed to support these best practices, offering tools to streamline client intake, improve data accuracy, facilitate collaboration, and ultimately empower you to provide exceptional client service and mitigate potential risks. By embracing these strategies and leveraging the power of technology, you can build stronger client relationships and achieve greater success in your estate planning practice.
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