Well-intentioned estate planning often fails to achieve its original goals due to a lack of proper administration. Estate planning vehicles should not only fit a family's wealth transfer objectives, but also should be continuously monitored to determine if they are achieving their intended goals. Executing an integrated approach to estate planning and wealth management requires the collaborative efforts of a team of multi-disciplinary professionals, preferably in a single firm, to avoid the shortcomings of the traditional approach.

The Traditional Approach
Traditionally, the client would work with an estate planning attorney or law firm, which would develop a basic plan and send the client off with a binder of documents and sometimes a letter of instructions to implement, oversee and maintain the plan. In this model, the implementation and maintenance of the estate plan might sometimes be picked up by one of the client's other advisors-perhaps the tax accountant or money manager, both of whom tend to have more frequent contact with the client.  In many cases, implementation and maintenance are neglected. 

If some other member of the client's non-integrated group of advisors suggests something new, such as a life insurance trust, a qualified personal residence trust, a grantor retained annuity trust or a family limited partnership, the lawyer's services might again be engaged. The client might complete another project with the estate planning attorney, but rarely is a fully integrated plan undertaken.

The result is incomplete implementation. Measurement of success is infrequent if it's done at all, and large time gaps pass between checkups.

In the traditional approach, the client must take the initiative to assemble and oversee the team of professionals. Pitfalls to achieving success are the client's reluctance to undertake the lead role, procrastination and the usual anxiety about the high cost of assembling numerous professionals, all billing by the hour.

The various advisors may perceive themselves as being in competition with one another for "top dog" status. Egos prevent effective delegation and teamwork, and there can be competition for limited fee income among the advisors.

Problems can arise from:
A failure to follow recommended procedures;
A failure to maintain proper books and records, such as for family limited partnership entities;
A failure to make timely payments or distributions from estate planning vehicles such as GRATs or CRTs; and
A failure to prepare and file necessary gift tax returns and income tax returns for estate planning structures.

The Integrated Approach
When a client uses a multifamily office, the client team should carry out the client's estate planning and wealth management objectives in an integrated fashion. The MFO should typically have a multi-disciplinary team of professionals covering tax, accounting, investment advisory, estate planning, philanthropy and risk management issues. An estate planning review should be one of the first projects.  The review should provide a baseline and serve as a refresher for the client of what, if anything, has been accomplished to date. The initial review can also serve as a springboard for recommended improvements.

Following this approach recognizes that the family's estate planning is not a "one-off" endeavor. Rather, it is a process of regular reviews, refined over time. Frequent communication between the multifamily office team and the client allows for continuous measurement of the success or failure of the plan and allows for mid-course corrections to achieve estate planning goals.
Let's explore some examples.

Family Limited Partnerships
Family limited partnerships (FLPs) are a common estate planning tool used to transfer non-marketable limited partnership interests to junior family members or trusts for their benefit.  The valuation discounts, coupled with the control over the FLP assets retained by the senior generation, make FLPs an attractive vehicle for wealth transfers.

FLPs can be created, documented, funded and maintained by the multifamily office team.

The estate planning specialists on the team, working with outside legal counsel, will propose the FLP, suggest terms, review drafts and oversee execution of the necessary documents.
The investment advisory professionals on the team will help to select the assets for funding the FLP, set up the custody accounts and assist with the transfers of assets.
The tax and accounting professionals on the team will obtain tax identification numbers for the FLP, keep track of dates for tax filings and payments and coordinate cash flow needs for tax payments with the investment advisory professionals.
The income tax professionals will prepare and file the appropriate income tax returns for the FLP, issuing K-1 forms to the partners, and will prepare individual tax returns for the individual partners.
If any trustees involved in the planning are partners in the FLP, the tax professionals will, if engaged to do so by the trustees, prepare annual trust income tax returns and coordinate cash flow needs for estimated income tax payments with the investment advisory professionals.
The estate planning professionals, in consultation with outside counsel, will arrange any appraisals and the preparation and filing of appropriate gift tax returns.
Annual FLP meetings will be scheduled by the MFO client service director-often the primary income tax advisor on the team- and it will be documented in the files.
The team will periodically review asset performance in the FLP and opportunities for additional gifting, such as with increased gift tax exemptions.

GRATs
Another frequently used estate planning vehicle is the grantor retained annuity trust (GRAT). A GRAT is an irrevocable trust designed to transfer future appreciation of an asset free of gift or estate taxes, after the grantor has received all payments of a reserved annuity payable from the GRAT assets for a period of years. If the annuity is structured to have a present value equal to or only slightly less than the value of the assets contributed to the GRAT, the upfront taxable gift on creation of the GRAT is zero or extremely small. If the assets in the GRAT appreciate at a rate higher than the modest interest rate prescribed by the IRS, the excess appreciation, if any, passes at the end of the annuity period free of gift taxes to the grantor's intended beneficiaries or to continuing trusts for their benefit.  If the GRAT assets fail to outperform the IRS interest rate, the assets will all come back to the grantor in the form of annuity payments and another GRAT can be attempted, if desired.

The MFO team can be very effective in assisting clients in implementing and administering GRATs.  Attention should be paid to initial asset allocation, and the valuations of GRAT assets and asset performance should be frequently reviewed to identify opportunities to lock in GRAT success (or failure, to be followed by another GRAT with the now depressed assets) as asset values fluctuate.  How might this play out?

The multifamily office team should look for opportunities to recommend GRATs for appropriate clients, often with a series of "rolling GRATs."  A rolling GRAT structure takes the annuity payment received by the grantor from one GRAT and rolls it into a new GRAT. In this way, the process of passing excess appreciation on the asset to the beneficiaries continues.
The investment advisory professionals will be consulted about the selection of GRAT assets.
The investment advisory professionals will set up custodial accounts for each GRAT and will oversee the funding of each GRAT.
Ongoing review of GRAT performance by the team may uncover the opportunities to lock in significant gains in a GRAT through asset swaps.
The tax advisors on the MFO team will calculate the gift element upon creation of the GRAT and will prepare and file appropriate gift tax returns.
The tax advisors will prepare appropriate grantor trust income tax returns for the GRAT and report the GRAT income on the client's individual tax returns.
New GRATs can be anticipated, created and funded with assets swapped out of successful or failing GRATs or with annual annuity distributions coming out of each GRAT.

Conclusion
An integrated approach to estate planning and wealth management, employing a multidisciplinary group of professionals working as a team, is more likely to be successful transferring wealth and minimizing taxes for clients. Wealthy clients who embrace this approach can achieve their wealth transfer goals early enough to negate the need for transfers at death, which result in higher taxes. Success in reaching wealth transfer goals can free clients to enjoy their wealth, pursue philanthropic goals earlier in life or leave a larger charitable legacy at death.

James R. Cody is director of estate and trust advisory services at Harris myCFO Inc. in Palo Alto, Calif.