February Tip of the Month – Avoiding Estate Tax Planning Disputes

Tax issues involving estate tax planning are frequently prone to disputes and claims. This is due in part to the long period of time that generally falls between the time when estate planning decisions are made, and the time when the results of the decisions are known.

Memories of the CPA’s advice and the client’s decisions fade over time, making documentation of the advice and decisions all the more important. Making matters worse, heirs typically aren’t involved in the planning and may allege that the decisions weren’t understood by the deceased.

If the CPA is dealing with disappointed, litigious beneficiaries after a client dies, documentation of the original planning and decision-making process becomes the CPA’s primary line of defense. To ensure that he or she has some protection from and during litigation, a CPA should implement a policy to detail all planning advice in informed-consent letters that outline the pros, cons and options in terms the client will understand.

Always obtain client consent. Effective informed-consent letters clarify that the CPA advised and informed and the client decided. With this letter, it is difficult for claimants to make a case that the CPA made the decisions rather than the client.

Tax professionals must be certain of their competency in this area and must be sure to document reliance upon the attorney drafting the estate plan. Also be sure to document which professionals are responsible for each aspect of the plan.

For more information and guidance about CPA firm insurance issues, call CAMICO at 1.800.652.1772 or visit www.camico.com.

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