Getting clients focused on proactive steps they can take to improve their estate and overall financial plans will help them feel more in control and positive in these difficult times. Plus, you'll garner goodwill for being the catalyst of constructive change. Here are some of the myriad common issues clients should address at least annually, with a spin on how the recession affects each step.

Back to Basics

To deal with economic turmoil, first take care of routine maintenance. Skipping the basics because the client doesn't want to open monthly statements is a sure route to worse problems. First, organize and update client records. These change all the time. You can't invest or revise a plan without current documents. Beneficiary designations for retirement plans, for instance, majorly determine required minimum distributions for heirs, funding bypass trusts, probate and more.

With the number of bank failures, job losses, divorces and other events over the past year, confirmation of every beneficiary designation is essential. This means having a copy of the actual filed document. Then, you can confirm that the beneficiary designations make sense in light of the client's economic realities.

Life insurance beneficiary and ownership designations are important to confirm for accuracy and currency. If a client's portfolio was halved, has he reevaluated insurance coverage? What about a 10-year term policy to fill the gap of his decline in wealth to assure adequate assets if he dies before a recovery? With the increase of the estate-tax exclusion from $2 million to $3.5 million, does he still need coverage for estate tax?

Other key documents to obtain and review are copies of titles to investment accounts, investment policy statements (does the client have one for each trust and FLP?), deeds for real estate, estate planning and business documents. You can't review business buyout insurance, prices or other planning without the core documents. With all the turmoil lately, many of these documents may have changed or disappeared.

New Circumstances

Today, change in circumstances is the big kahuna! Asset values have changed dramatically. Heirs have new and different needs in light of the economic downturn. Help clients identify and document those needs so current planning, asset titles and wills can all be tested.

Key family relationships may have changed too. Has there been a divorce, new partner, new child? Has an heir been divorced or found a new partner? What documentation is necessary to understand the implications (prenuptial, postnuptial, property settlement agreement)? The interest rate reduction has profound impact on intrafamily loans, estate planning transactions and more.

New Laws

The tax law now permits $3.5 million to pass free of estate tax. This affects client wills and revocable trusts, how assets should be owned to permit these trusts to be funded, what insurance coverage is necessary and more. Many clients' wills fund the maximum federal exclusion amount. That may have been optimal when the exclusion was less, but now it may be a costly mistake. If your client lives in a state with an estate tax that applies at a lower level than the federal exclusion, nearly $250,000 in state estate tax could be incurred on the death of the first spouse. Does your client want to incur this much tax on the first death?

The annual gift-tax exclusion has increased (courtesy of inflation indexing) to $13,000 in 2009, from its initial level of $10,000. Do powers of attorney and other client documents permit the full use of this amount or are they limited to the old $10,000 gift amount?

If your client's trusts were prepared before the current versions of principal and income rules were enacted, it may still be possible for the trustee to make a conversion of the trust to use unitrust payments or adjust principle to income (or vice versa) to deal with wild fluctuations in trust assets. This type of analysis may be critical in preserving the peace with beneficiaries and provides the guidance you need to invest funds optimally.

On a different note, do your clients' estate and business documents address the restrictions on disclosure of private health information under HIPAA? Your client's medical agents won't get access to hospital records without the appropriate language. If your client's business partner is disabled, your client will have a tough time getting the typically required medical letter to prove it without the correct lingo in his or her documents.

Technical Grab Bag

Can you communicate with your client's agent and children if he becomes incompetent? Attorneys can be constrained by attorney-client confidentiality rules. Accountants face tough restrictions on disclosing tax information under Internal Revenue Code Section 7216. While not commonly addressed in years past, authorizing advisors to deal with family members, agents and one another could be vital to helping a client. Updating paperwork to address this is vital.