So I was meeting with the beneficiaries of an estate to finalize some of the tax filings to be made. The tax filings reflected a series of transactions completed to eliminate double taxation on the disposition of some of the estate’s assets. What was causing the possibility of double taxation was the fact that my client (now deceased) had purchased a property thru a holding company, which was in effect was his principal residence. He made the purchase in this manner for financial reasons and with the full knowledge that unless he transferred it out at a later date to himself or his spouse personally, his estate would have to deal with the tax bill associated with the disposition of the property and possible double taxation. To be sure, I spoke with my client on several occasions about this situation. Dutifully, I put memos to file to document the advice etc. and I also know he got legal advice on this matter as well.

What I did not realize until after he was gone was that he never spoke to his beneficiaries about this. And I simply forgot to encourage him to do so.

Every meeting with the beneficiaries since my client’s passing including the last one started with “so explain this to us again, who advised him to buy the property in this manner?” Awkward way to start a meeting, no less.

The reality for all professionals is that there is a duty of care owed to our clients, as well as their family members and beneficiaries. I believe accountants and financial planners hold a fiduciary relationship with their clients and have an unparalleled knowledge of the client’s family circumstances and overall affairs. It is a fact of modern society that clients and their families are more aware of their legal rights and the standard of professional advice that should be provided. It should be of no surprise that family members and beneficiaries in estate matters are now carefully scrutinizing the professional advisers to their late partner or parent and are reviewing their options if they believe appropriate standards of advice are not met.

The beneficiaries in this case are evidently still grieving for their lost parents and but also for what they perceive to be lost dollars to the tax authority. Nevertheless, my client had good reason to do what he did at the time he did it but as his adviser and friend, I should have followed my own advice and ask that he inform his beneficiaries with the decision he made, as it might affect their legacies in the future. At the very least, it might have made our meetings since my client’s passing a little less controversial.

Happy Reading