The Virtues of Simplification

November 06,2022 09:54 AM Comment(s) By Pablo

One of the initial tasks of my engagements as a professional fiduciary is to "marshal the assets" of my clients.  That means finding all the bank accounts, insurance policies, investments, real estate, credit cards, etc. that are held by my clients.  Some of those assets may be held in a trust.  Some may be held in a deceased spouse's name.  Some provide statements, some do not.  It can take months, even years, to find everything.  And even then, there's some lingering doubt that we've found everything.  It's a kind of forensic accounting scavenger hunt (the most boring kind of scavenger hunt).


Some of these accounts are so small that the cost of finding them, contacting the financial institution, generating the required documentation and consolidating the funds can outweigh the value of the asset.  But they legally have to be hunted down, consolidated and treated as part of the trust's assets in any case.


One of the process improvements I've implemented in the last few years is to work with my older clients to "tidy up" their financial lives.  This not only makes things easier in the short run, in terms of documentation for taxes and keeping track of of all the accounts, but it makes it much easier when it is time to execute the terms of the trust.  It lowers costs for everyone involved and reduces the chances of errors and omissions.


What does "tidying up" mean in practice?  It might be helpful to go through the list below:


  • Create a list of all financial accounts and assets.  
  • Add any pertinent information:
    • Contact information for the institution
    • Account numbers
    • Name of any person that you worked with at the institution
    • Rough estimate of value
    • Username and password (this should be kept separate from the information above)
  • Identify assets and accounts that are not providing value as a separate asset.  Some of these may be left over from a previous employment or from an investment that made sense at the time and that you simply haven't had the time to unwind.
  • Consolidate these assets into the most appropriate accounts (take into account the tax implications of selling appreciated assets).  The goal is to reduce the overall number of accounts and assets.

One of my clients has a number of real estate investments (both developed and undeveloped) that she acquired all over California and Oregon over the years.  They were purchased with the idea that she might someday move to these places.  She had to work with property management companies to manage tenants, keep track of and pay property taxes and keep an eye on developments in these areas that might affect her investments.  It was overwhelming and caused her stress.

Once she acknowledged that she wasn't actually going to move to any of these places, she and her estate attorney worked at simplifying her real estate portfolio.  She put some of the income-producing properties in a life estate that generates rental income for her during her lifetime and will be donated to a non-profit organization upon her death.  Others were gifted outright to non-profit organizations and she received a tax benefit for doing so.  In the end, she ended up with a structure that made financial sense and that she no longer had to worry about.

As my clients age, one source of anxiety is that they can't keep track of all the accounts and assets that they've accumulated over the years.  Simplification isn't just practical, it is a relief.  It's also a gift for whomever has to take over the management of those assets and execute the will or administer the trust. 

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