Your clients may be aging, but that process won’t go on forever.

Clients die; moreover, a client’s parent or spouse might die, leaving the client to handle the estate.

In all such situations, the asset transfer will go much more smoothly if an advisor is on the team taking care of the estate, along with an attorney and a CPA, according to Peter Lang, managing director and partner at Strata Wealth Management in Harrison, N.Y.

Lang has co-authored a white paper on how to handle an estate when a loved one passes away. As the white paper explains, “The financial advisor is critical, as he or she has the job of opening the estate and trust accounts. This can only be done once the will has been probated, the executor has been appointed, and a Tax Identification Number has been issued by the IRS.”

That process can take weeks or months. What should the advisor do with the assets in the interim?

“If the assets were all in the name of the deceased, there is nothing that can be done until the estate account is opened,” Lang said. “Most firms place blocks on accounts of deceased clients to prevent unauthorized trades.”

Even if the accounts were discretionary, allowing the advisor to make trades, that permission dies with the client, Lang said. It’s critical for the heirs and the estate attorney to get a probate court to act rapidly.

“A trust that names a co-trustee or a successor can be valuable,” he said. “In that case the transition can be much faster. You’ll only need a death certificate and not a court order to act.”
Once assets are in the estate account, how should they be managed? That depends on the specific situation, Lang said.

“For one very large client, for example, the vast majority of the liquid estate was going to be used for payment of estate taxes. The account was in trust; shortly after the client’s passing the trustee instructed me to begin the sale of the muni bonds in the account. I gradually sold over the ensuing weeks and months, as I got good prices on the bonds. Within about four months after her death, we had completely liquidated the majority of the account and put the proceeds into cash, so that way there was absolutely no risk of fluctuation.”

That approach ensured that the necessary funds would be available to pay the estate taxes while leaving the business interests running without interruption. Estate taxes are usually due nine months after death, Lang pointed out, noting that nine months can pass very quickly.

From such experiences, Lang has learned that a financial advisor’s role is vital. “We need to help ensure that financial matters move smoothly,” he said, “especially important when dealing with a surviving spouse. Generally, cash flow is critical.”

The biggest problem, Lang said, is often the surviving spouse’s lack of preparation to deal with all the issues that can come up.

“That can be the case even if the other spouse was extremely ill,” he said, “so his or her passing was expected. The survivors may still be in shock, conflicted in dealing with grief and also with practical matters. Some deal better, but some not.”