I spent part of last weekend proofing the manuscript for The E-Myth Attorney book. I can’t even tell you how excited I am to finally see it at this stage. The book should be available on Amazon in the June timeframe… the few steps are being looked after now, like final proofing, quotes endorsing the book are being collected, press releases to major publications… all the little steps that will wrap up this year-long project that Robert and Sandy took on with the original author of the E-Myth, Michael Gerber.
What a book.
It’s hitting the nail on the head again and reminds me of some of the basics we talk about here at the Academy. It’s good to be reminded! If you haven’t read the E-Myth by Michael Gerber, it will literally take you only a weekend, if that, to read it. If you’ve read it – read it again before this book comes out. I’m noticing that this book ISN’T the “E-Myth” adapted for attorneys… it really picks up where that book left off.
I am only about a third of the way through it, but one section that jumps out at me is this:
“Earlier in this chapter, I alerted you to the inevitable conflict between the attorney-as-employee and the attorney-as-owner. It’s a battle between the part of you working in the practice and the part of you working on the practice. Between the part of you working for income and the part of you working for equity.
Here’s how to resolve the conflict:
- Be honest with yourself about whether you’re filling employee shoes or owner shoes.
- As your practice’s key employee, determine the most effective way to do the job you’re doing, and then document that job.
- Once you’ve documented the job, create a strategy for replacing yourself with someone else (another attorney, or, even better, a paralegal) who will then use your documented system exactly as you do.
- Have your new employees manage the newly delegated system. Improve the system by quantifying its effectiveness over time.
- Repeat this process throughout your practice wherever you catch yourself acting as employee rather than owner.
- Learn to distinguish between ownership work and employee-ship work every step of the way.”
Whether you’re an attorney or not, I have found that a major challenge for many people is that they think they need to do it all. Sometimes they just can’t delegate, sometimes they believe that nobody else can do it as well as they can, sometimes they don’t have a vision that sets the stage to have the staff to delegate to, sometimes their ego starts whispering in their ear telling them that they need to be recognized for doing the technical part or some other part of the job. Maybe this rings a bell or two for you?
Putting a practice together that has an attorney playing the role of counselor and CEO is a productive balance to strive for—and it rarely happens by accident.
Director, Member Services
American Academy of Estate Planning Attorneys, Inc.
System # 3: Engaging Your Prospects – Predictably Inspiring Clients to Take Action and Retain Your Firm
Now that we’ve seen why marketing is so important to your law firm, let’s look at what happens once the marketing is in place.
When you engage in marketing, your efforts will eventually produce some prospects. Now, these prospects are different from those that came to you through a referral.
Referred prospects walk into your office with an intent to buy. That is, they are looking for reasons to hire you.
Marketing prospects on the other hand, have a very different mindset: they’re looking for reasons NOT to hire you. And quite honestly, many of your marketing prospects will not retain your firm unless you understand how important it is to listen to what their concerns are and address them. This may sound simple, but we see attorneys have problems with this all the time.
However, there are some steps you can take to improve your ability to listen carefully, address the real concerns of prospective clients and help more families plan. There are really 8 steps to a great meeting. We will not go into intricate detail today, but we’re going to briefly describe them all.
But before we do that, I want to let you in on a little secret: master the first three steps, and the other five will take care of themselves.
1. Build rapport.
Rapport is that thing that gives your client or prospect a comfort level when they walk through your door. It’s what puts them at ease and gives them the sense that they’re “in the right place.”
This rapport must be established from square 1 and be consistent in every contact. From the moment a prospect calls your office, you and your staff should be establishing and re-establishing your rapport. Greet your client by name. Be polite, courteous and helpful at every turn. Coach your staff so that they handle all clients in the best manner possible.
The goal is to make prospects and clients feel, “OK” all the time.
2. Start every meeting in the same way.
Starting your meeting on time and in the same manner will go a long way to building that rapport we discussed earlier. Pick a spot – whether it’s your office or the conference room – and then use that spot every time you need to meet. This familiar environment encourages a comfort level for you, and when you are at ease, it will put your prospect at ease as well.
Incidentally, we’ve found that a small, round table works much better than having you behind a big desk while your prospects sit on the other side.
Now, for format, we like to use what we call an “upfront agreement.” Once you’ve greeted your prospects, confirm how much time has been set aside for the meeting. Ask if this still meets their needs. Establish the agenda,.. a written one you can hand the client is even better because it creates a real sense of purpose, Give them the opportunity to add issues to the list and get agreement that everyone is on the same page and knows what to expect.
One important thing to note: when talking about the agenda, end with the concept that they should be ready to make a decision at the end of the meeting. You should then immediately explain that saying “no” is okay too. This defines the goal of the meeting while removing any pressure to commit.
3. Use the Decision Funnel.
This is a three-phase process that guides your prospect to a decision. The first part is the question phase. Ask your prospect why they’re here. What concerns have brought them to your office? How long has this been a concern, and how have they addressed it in the past?
Knowing how to ask probing questions is what makes a great counselor but remember, during this phase your ultimate goal is to listen. Attorneys often make the mistake of doing most of the talking, but good practice demands that your prospect should be doing the bulk of the talking.
As they identify these “surface issues”, ask what would happen if the issue is not addressed. This is the second phase of the Decision Funnel. Let them tell you what the consequences would be if something happened before proper planning was in place. Again, listen carefully.
All too often, attorneys feel the need to explain why estate planning is so important, but the real key is to let your prospects realize the necessity on their own.
Phase Three is probing on an emotional level. This is the point where most prospects will take action and make a decision.
Ask your prospects how important these issues are. People who answer “very important” are typically ready to move forward.
Now, as I said, there are 8 steps to engaging your clients. The other five are as follows:
4. Confirming the investment of time and money needed to proceed.
5. Confirming that all the decision-makers are present.
6. Defining the steps need to determine the right plan.
7. Demonstrating how the appropriate plans will address their concerns voiced earlier and how the plan works.
8. Confirming that they don’t intend to change their mind after they leave your office.
Ultimately, you’ll want to cover all eight steps to increase your client retention ratio but if you master the first three, you’ll find that the remaining five just fall into place.
Another critical point is that old habits die hard and, when under pressure, you will revert to whatever you’ve always done. With attorneys this usually equates to talking endlessly in an effort to convince your clients to do what you say. But this is not the way to success.The only way you can institute a new system and build your consultation muscles is to practice and practice some more.
In the beginning, write out the opening of the meeting and practice it everyday. Write out the questions you will ask and repeat them daily until you know them without thinking. Do some practice consultations with staff or family members. You can even have your questions written out and with you in the consultation room just in case you want to glance at them.
Once you start to really listen for issues and ask these questions, you’ll begin to see a dramatic difference in the success of your consultations. Remember, start the meeting the same way each time and be sure to use the upfront agreement. Probe with questions that allow you to uncover the underlying issues and listen to the answers. Let us know if you see a difference in your meetings and your results.
President & Co-Founder
American Academy of Estate Planning Attorneys, Inc.
If that describes the staff turnover in your estate planning law firm—it could also ultimately describe your law firm!
All too often we can look around at any business, law firms are no exception, and watch the turnover in staff happen over and over. Staffing experts have reported that replacing an employee costs the owner 28% of the first year’s salary! Staffing is worth investing some time, effort and systems to support! It’s not uncommon to see 3 or 4 receptionists in less than a year. It’s also not uncommon to catch the law firm leaders scratching their heads and pointing to the salary, or the job market or something other than the hiring and training processes they have available in the firm.
Even the smallest law firms need systems that cause the advertising, interviewing, testing, hiring and training steps consistent and easy. If a new hire comes on board and has the all-too-often “sink or swim” indoctrination – you’re setting the new person up for failure and yourself up for frustration.
Once you have advertised, with an ad you’ll save so you can use again, you’ll schedule interviews and handle those with a systematic approach as well. Once you test the person and make an offer, your offer letter is simply updated from the last time you used it. It’s easy to greet the new employee on the first day with an employee handbook—you’re never too small to need one of those!
Your employee handbook doesn’t need to be a giant binder, but it does need to cover obvious procedures you expect your team to be aware of. They should know up front how vacation and sick time are handled, when an employee is eligible as well as any other description of benefits you offer. A schedule of holidays for the current year and any other dates that your office will be closed such as days between Christmas and New Years if applicable.
Creating what we call an “Orientation Schedule” really spells out what the first two full weeks on the job look like from one moment to the next including meetings with the supervisor scheduled into the plan. All the training on specific responsibilities can be spread out so it is not only digestible for the new hire but also for the rest of the team! Resources and training materials can be created as certain elements of the training take place and it goes smoothly. The added benefit to such an organized approach your knowledge that you have done everything you could to help this person succeed—and you have a front row seat to see what kind of fit this person will be sooner rather than later.
By not hiring under the gun when you need someone yesterday—and taking your time, you can find the right person and add years to the length of time your employees work in your firm. Taking these steps and having the systems to be able to lean on will ensure you make sound decisions and that your employees will love what they do, add value for your clients and save you countless hours of retraining replacements!
Director, Member Services
American Academy of Estate Planning Attorneys, Inc.
System # 2: Integrated Client Marketing System – Multiple Marketing Activities Generating an Endless Supply of Qualified Prospects
While we firmly believe all 11 Academy Systems need to be up and running smoothly, there is one that makes all the others possible. Generating a consistent stream of qualified prospects and repeat business with premium fees is the very foundation of a successful estate planning law firm.
Unfortunately many attorneys still believe that all you need to worry about is the quality of your lawyering skills. In other words, if you hang out a shingle and don’t mess up too badly, clients will beat a path to your door. There was a time that when doing business was as easy as that, but alas, those days have gone and I’m afraid they’re not coming back.
Today’s marketing strategies are anything but simplistic and in this brave new world if you want someone to see that shingle and notice your firm, it may have to be tweeted, blogged, dugg and stumbled upon first. The basic principles of marketing are changing before our eyes and, believe me, lawyers are not exempt.
Marketing used to be the act of seeking out clients and enticing them with your credentials and skills, but there’s a new world upon us that requires that you be available when clients seek you out. The universe of social media, like Facebook, Twitter, Linkedin and Avvo now aggregate all the potential clients online and the act of bold marketing is frowned upon. The marketplace is now more like a giant cocktail party where directly soliciting business would be offensive.
But even in the face of all these new marketing venues, one rule still holds true – to expand your business, you must do one of three things:
1. Acquire new clients
2. Entice existing clients to buy more
3. Increase the fees your clients pay
Now for most law firms, that first directive is priority number one… but the smart attorney will give their attention to all three.
In fact, while you’re busy working that strategy to attract new clients, your marketing plans for increasing fees and courting your existing clients should be hard at work as well.
Because while you’re wining and dining those new prospects, someone else has their eye on your client base. Now, if you’ve got a good marketing plan in place, there’s no need to worry…
But if you don’t?
Those existing clients might decide it’s time to try someone new.
Someone with more to offer… someone who values their business… someone who’s giving them the attention you should have been giving.
Which brings us to the question at hand:
Does your firm have marketing systems in place? Do they operate without your constant involvement? Are you able to track their effectiveness? Do you keep your eye on your client acquisition costs as closely as your bank balance?
One of the primary components to our 11 Essential Systems is an integrated client marketing system — a system that incorporates all of your activities into one solid plan:
- Systems to generate referrals from existing clients
- Systems to generate referrals from Centers of Influence
- Systems to generate new clients by going directly to the marketplace
- Systems to generate clients using the internet and social media
- Systems to generate new clients through image building and public awareness
- Systems to position the client for additional services
- Systems to position the value of your premium fees
These systems allow you to have multiple streams of marketing activities every month… activities that can be mapped out for the year and seen at a glance…a strategy that’s key to building and growing your firm.
And after all… isn’t that what all this marketing was intended to do?
President & Co-Founder
American Academy of Estate Planning Attorneys, Inc.
Nobody wants to hear that the path to success looks more like an obstacle course than a garden path out of a dreamy painting.
Talking with attorneys about the “systems” that make it possible to be only a counselor and a CEO in their law practice always *sounds* good until you look closer at exactly what it takes to change a habit or system or to create one out of thin air. But a second look at “what it takes” can be helpful – it’s as simple as breaking it down into manageable pieces… starting with a clear look.
In my opinion the top three things you can do to adjust your course or impact the future of your estate planning law practice are:
October/November timeframe each year:
- 1. Review Your Strategic Plan. Pull out the ORIGINAL plan you had when you opened the doors once per year. It allows you to see how much of your vision has come to pass and helps you to focus on the specific goals to put into place for the coming year. It’s also helpful in the sense that you can CHANGE your vision… actually change the document that you’re reviewing. Sometimes your vision needs to be adjusted, for example, if you’ve added an associate with Elder Law experience, Elder Law work may not have been something you saw in your future a year or two ago, your strategic plan and vision for the overall firm needs an adjustment.
Helpful Tip: If you want a 3 or 4 page “form” we use at the Academy to pencil out your own strategic plan just let me know (email@example.com) I’m happy to email it to anyone who wants it.
- 2. Create Next Year’s Marketing Planning Calendar. Setting the goals for revenue in particular categories will allow you to determine how many cases you need in those categories. Say for example that you want $425,000 in Living Trust revenue and your average trust fee is around $3,800 – you want 112 new clients who need that type of solution in the coming year (or 9-10 per month). Knowing this for each category makes the planning easy. The marketing activity that you’ll need to execute to generate 15 potential living trust appointments per month becomes more clear. You’ll know where to find people who need this type of help and you’ll schedule the necessary activity for each month next year before this year is even over.
Helpful Tip: You’ll review this marketing calendar again when last year’s financials are reviewed at the beginning of the new year, making adjustments that you need to make based on the actual numbers you’re wanting to influence. January/February timeframe each year:
- 3. Review Last Year’s Financials. Each year approximatley 60% of the Academy membership submits their P&L from the prior year. I have the immense privilege of being the person here at the Academy who gets to review these numbers with each law firm! We discuss all of the revenue, all of the expenses, and all of the compensation from last year. The next part of the discussion is about which specific numbers the attorney wants to change… followed by the discussion of how to go about changing those exact numbers! Year after year, I get to watch the growth in these individual firms and it is so completely awe-inspiring. (By the way, the law firm names are taken off, and all firm financials are entered onto a spreadsheet so each attorney who submits P&Ls can see other members P&Ls in a private meeting at our Spring Summits… the conversations are really something).
If you’re not a member of the Academy you can still structure that type of review on your own! Once you have the P&L, the analysis takes very little time. After the review of the past, your use the same information to project what you are on target for in the coming year and you have an opportunity to go with what you see or to make some strategic marketing decisions proactively… instead of waiting until you see blank pages in the calendar to spur the marketing into action.
Helpful Tip: Make sure when you review your own financials ensure that your accounting system is set up with the appropriate Revenue Categories. Each category (Living Trusts, Wills, Restatements, Probate, Trust Administration, Medicaid, etc) requires completely different marketing to impact that particular number. Knowing the number of cases and revenue that exists now in one category enables you to implement marketing efforts to change a specific number.
You’re Welcome to Join Us on our Upcoming Call. The founders of the American Academy will be covering these and other systems that you can actually implement right after our free call for non-Academy members next Thursday, February 25 at 2pm PST. Feel free to register and join the call www.7DeadlyLawFirmMistakes.com/sm
Director, Member Services
American Academy of Estate Planning Attorneys, Inc.
System # 1: Strategic Planning System – Aligning Your Business With Your Personal Values
Ask an attorney how they spend their time and they’ll likely have a long list of tasks on their agenda.
Client meetings, answering emails, doing legal work and of course, dealing with all the various interruptions that occur on any given day. In fact, it’s not unusual to find that most attorneys spend the majority of their time working “in” the business.
But if you want your practice to be more than just a place to pass the time, then you need to step back from that “working in the business” philosophy and instead, learn to “work ON the business”.
The best way to do this is to implement a Strategic Planning System into your business model. This system is essentially a building block approach to transforming your law practice into the business you’ve envisioned.
At the Academy, we use a three step process, fashioned after the Strategic Planning System featured in Michael Gerber’s best-selling book, The E-Myth:
1. Create your Primary Aim
Your Primary Aim is basically your ideal image of what you’d like your life to be. Start by asking the question “what’s my idea of a perfect day?” Not just a work day mind you… your entire day. What do you want it to look like? How would you spend your time?
A great exercise to help with you with this task is to take a piece of paper and create three columns:
The first represents what you do not want in your day, but currently have. The second column represents those things that you want to keep… that is, the things you DO WANT in your day. In the third column, list what gets in the way… interruptions, busy work… What is it that keeps you from creating your perfect day?
So what does get in your way? The answer we hear most is that YOU get in your own way. The trick is to recognize your patterns of interference and commit to do something about them.
Knowing what your perfect day looks like begins to set standards for you to effectively measure your progress. It also gives you a foundation for making decisions about how you spend your time.
2. Create your Strategic Objective
Once you’ve created your Primary Aim, you can decide what kind of law practice you would need to have to support that perfect life. This is where your Strategic Objective comes into play.
Your Strategic Objective is essentially a detailed plan of your practice:
- What services will you offer? Will you do basic Estate Planning only or will you also offer Asset Protection, Elder Law and Probate?
- What are your yearly goals? What kind of profit do you want? How many employees?
- What markets will you target? Retired? Young affluent? Who makes up your ideal client base?
- What’s your competitive advantage? How do you differ from the competition? What’s your unique selling proposition?
Answering these questions gives you a path to follow. You begin to see the steps needed to move forward toward the life you want in your Primary Aim. Use these same questions to map out your firm for one year, five years and even ten years down the road and you’ll see your “Big Picture” really start to take shape.
3. Create your Organizational Strategy
Unlike what you may have seen in the past, this is not just a list of who works in your firm.
Instead, we’re going to go a little deeper than that and assign responsibilities as well.
You can start by taking a blank sheet of paper and drawing a box at the top. Write your name here, because you’re in charge. Now, branching out from that box, draw five more, labeled as follows:
- Lead Generation / Marketing
- Conversion / Consulting With Prospects
- Fulfillment/Getting the Work Done
Under the Lead Generation box, draw a separate box for every type of marketing program you’re going to have. Do the same for the other four boxes and then go back and fill in the names of who will do what (this is the quickest way to see if you’re spending your time in areas that should be delegated to someone else.)
Now we’re clear on the kind of life you want; a detailed picture of how your law firm will support it and who will be responsible for making it all happen… a virtual blueprint for your business.
And with that blueprint in hand, all that’s left is to start building.
Estate Planning and Elder Law attorneys often face ethical dilemmas. An all too real concern is: What do you do when your client tells you he or she is planning to commit suicide?
Those over age 65 have a higher rate of suicide than any other age group. So, this question is more than an esoteric question for Estate Planning and Elder Law attorneys.
Model Rule of Professional Conduct (MRCP)1.6(a) provides that a lawyer may not reveal client information, unless the disclosure is impliedly authorized to carry out the representation. An example of this would be if you undertake joint representation of a husband and wife. If the husband tells you he is thinking about suicide, you could tell the wife.
A more challenging situation arises when you have a client who has not consented to joint representation, like with a single client. In that case, the attorney would need to rely on the exception provided in MRPC 1.6(b)(1). Under (b)(1) a lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes it necessary to prevent reasonably certain death or substantial bodily harm. However, prior versions of the Model Rules stated the exception somewhat differently and only allowed the information release to prevent a criminal act reasonably likely to result in death or substantial bodily harm. Similarly, under the Model Code of Professional Responsibility DR 4-101(C)(3), the attorney is allowed to release the information when the client has an intention to commit a crime and the release of the information is necessary to prevent the crime. In states where suicide is not illegal, the Model Code and the prior version of the Model Rules do not allow the release of the information.
If you encounter this situation in your practice:
- Check your state’s current professional responsibility rules.
- Consider whether the client consented to joint representation which would allow the disclosure.
- Check whether suicide is a crime in your state.
- Refer the client to the National Suicide Prevention Lifeline www.suicidepreventionlifeline.org (tel.: 1-800-273-TALK)
The “magic” of social media is almost overwhelming! Are you Linked Up with LinkedIn? Is your face or your law firm on Facebook… have you claimed your AVVO profile, are you writing a blog… or are you waiting for the fad to pass? Nobody is going to fly over law firms and sprinkle fairy dust that removes the need to get with the times so if you’re waiting—you’re letting opportunity pass you by.
When you have an chance to put your toe in the water with other opportunities what does the little voice in your head usually say?
- I’m too busy
- This will never work
- I don’t know anything about that, let me stick to what I do know
- This newfangled idea is for the new guys just getting out of law school
- What will other attorneys think if they see me doing this
- My staff will revolt if I expect something new
- I’m not interested new inventions that may not work out
The voice in our heads is an important voice to listen to. The main benefit we might get from listening to that voice is that there is an opportunity to hear the same thing over and over. It’s either telling you to JUMP or WAIT. Sometimes jumping too quick isn’t necessarily good if it causes you to let go of more tried and true results activity in exchange for a new untried idea. But then again, if you just WAIT, what are you waiting for? Are they good reasons to wait?
A recent survey said that 70% of business people did not want to get involved with Social Media because it just took too much time. You’re right in thinking this could be time-consuming. This is the type of activity that could easily become a black hole and take you away from the core business that is already working for you. The trick is to focus the amount of time you’ll spend on this. Budget your time wisely, but don’t ignore the effort. It is free and powerful law firm marketing—and worth figuring out!
How do you eat an elephant? One bite at a time.
Don’t think you’ll tackle all this in a day. Look at the big social media picture. Get clear on what you where you want to be seen and active online then chip away at all the steps, delegate some (not all) of the steps. We feel strongly that estate planning law firms need a presence by having a:
- Blog (that is linked automatically to Facebook, Twitter and LinkedIn)
- Professional Facebook account
- Facebook fan page for the law firm
- LinkedIn account for the attorneys in the firm
- Profile on AVVO and appropriate activity to rank highly on the AVVO directory
If you want to measure what could come from social media without jumping in, at least put your toe in the water. Open a Facebook, LinkedIn and Twitter account for work related contacts. Post a photo of yourself with an accurate and interesting “profile,” make other professionals your “friends” and watch what they do. Look to see who their friends are, what are they saying and how are they generating business and relationship with those in their networks? You don’t have to post witty and wonderful postings, just watch. Little by little various benefits to your firm will show themselves.
Set a time each day to at least look at what others are doing. When you are ready to dive in—you’ll be all set with some confidence and the basics will be in place for you!
As estate planning attorneys, the underlying assumption has always been that clients want to maximize their wealth and minimize the costs associated with disability and ultimately, death. Our clients, we believed, wanted all our efforts to make that happen.
And certainly, that’s a good place to start… but maybe it’s not the only goal we should have on our agenda.
In a recent news story, an Austrian millionaire with an estimated $4.5 million estate has decided to rid himself of his wealth and find a different meaning for life. Believing that money itself causes unhappiness, he speculates that the opposite must also be true and not content with just a cocktail party conviction, he is putting his theory to the ultimate test: he’s trading his wealth for a small cabin in the mountains. He’s selling his villa, his home in Provence, his cars, planes, even his furniture and donating it all to his micro-finance charities in Latin America.
He said, “My idea is to have nothing left. Absolutely nothing. Money is counterproductive. It prevents happiness.” He said in the past he wasn’t brave enough to give up his luxurious lifestyle. During a three week vacation in Hawaii, he came to realize that his life was a soulless journey. After spending all the money he could imagine, he felt that he never had an authentic conversation or met any real people.
His solution? Give everything away.
Reading this, I’m reminded of the Bible quote that almost everyone gets wrong: “money is the root of all evil.” But what the verse actually says is that “the love of money is the root of all evil.” Funny how those few extra words can give the verse such a different meaning!
My point is that estate planning must take into account a wide spectrum of client beliefs, including those that are about something other than money. All too often it’s easy to take shortcuts in consultations and listen for what we would actually do if we were in their shoes—rather than listening for what is most important to the client. A careful interview with this Austrian client might have revealed that his true desire was to benefit others and create a legacy that will be remembered longer than his shopping sprees and flamboyant vacations… then perhaps settle into a quiet and simple life while he sees his money having a longer lasting impact.
Who knows for sure what was truly important to him, but as counselors, listening carefully to your clients’ values and beliefs is the hallmark of quality planning. To do otherwise would be a dangerous path indeed.
The are a host of questions swirling around the one-year repeal of the estate tax for 2010 and the scheduled year-end sunset of EGTRRA. We discussed these issues on last month’s Classroom Conference Call for Academy member attorneys and on the members’ list. On that call we discussed that formulas used for the past many years would result in the maximum share of the client’s assets being funded into the Family or Credit Shelter Trust. For the vast majority of clients, this would be consistent with their goals of minimizing future estate taxation.
However, your state may be muddying the waters. Many states are considering legislation which would construe Wills and Trusts for people dying in 2010 as though they had died in 2009 – when there was a federal estate tax after a $3.5 million applicable exclusion.
Example: Client dies with $10 million in his married separate living trust. Clients documents, prepared prior to 2010, fund the Family Trust with the maximum amount that can be passed free of federal estate tax. Ordinarily, this would fund the Family Trust with the entire $10 million estate and would be consistent with the client’s goal of tax planning.
If your state passes the legislation under consideration in many states, in the example above only $3.5 million would be funded into the Family Trust. As a result, $6.5 million which otherwise would have gone into the Family Trust will go to the surviving spouse and will not escape taxation at the death of the survivor.
If your state passes such legislation, it may be necessary to override the application of the new statute specifically to achieve the optimal result for tax planning: full funding of the Family Trust.
It has often been said that the road to hell is paved with good intentions. It is possible that your state legislature, attempting to correct “problems” due to the federal repeal of the estate tax, may thwart your clients’ estate planning and tax planning efforts.
Be on the lookout for legislation in your state!