Tax practice management: appreciation of client family dynamics: a case study.

• Author: Caplan, Robert M.

CPAs DO THEIR BEST TO KEEP UP TO DATE WITH tax developments. Every year they enroll in tax update classes and review myriad tax changes. However, much of their job involves dealing with family dynamics, and often this requires skills related more to understanding and communication than technical expertise. In addition, practice management issues must be considered, especially when serving family members. Three useful points should be used to improve practice management when families are involved:

* Understand the perspective of each family member;

* Keep in mind who the client is; and

* Advise in the client's best interest.

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Differing Perspectives of Family Members

Betty, a surviving spouse, has two children, Sally and Constance. For several years Betty has engaged a CPA to prepare her individual tax returns. Now she has asked her tax adviser to help her prepare an estate plan.

A majority of Betty's estate is in rental real estate. Her net worth is around $5 million. Betty does not want to leave money outright to Sally, because Sally's husband has had two failed businesses, and Betty is concerned that he will burn through his wife's inheritance. Constance has a degree in finance and works as a money manager. Betty would like to have Constance receive her share of the estate outright and to be the trustee of a trust holding Sally's share. Betty also believes that the trustee should maintain the family rental properties for at least 10 years and sell them only if they are exchanged for excellent properties in the same neighborhood.

To determine an estate plan, the CPA meets with Betty's children. Sally claims privately that her mother has been extremely ungenerous and constantly belittles her and her husband.

Constance is concerned that being in charge of Sally's trust will cause a rift. She confirms that Betty has not been generous. She also tells the CPA that the rental properties have significant amounts of deferred maintenance and she is too busy to manage them properly, so she would prefer to sell them after her mother's death. Constance's husband does not get along with Betty and refuses to go to any family functions where she is present.

Interviewing the various family members becomes a crucial part of developing an estate plan. Without this information, an adviser could easily create an unworkable plan that does not achieve the intended objectives.

Who Is the Client?

Often multiple members of a family--even...