The markets have continued their swoon and your clients are, understandably, shell-shocked. One way to contain the damage is to work on things that, unlike the market, can be controlled.

The estate planning component deserves another look now that the market is a much different place. Helping your clients take care of these items is therapeutic and financially beneficial because it helps them fulfill the original intent of their various estate planning choices.

Revisiting Wills

First off, wills may require revision in light of market changes. As a financial planner, you won't revise the document, but you play an important role in reviewing the strategy that underlies the document and the client assets you're managing. Dramatic stock market declines, real estate devaluations and changes in the value of other assets may wreak havoc on existing plans concerning the value of bequests. Some wills include bequests of specific assets to particular heirs, and these bequests may no longer meet their intended objectives. The value assumptions that served as a foundation for these plans-for example, a vacation property to a son, or the family business to a daughter-should be reviewed now, as these values may have changed dramatically. While these two assets may have had approximately equal value a year ago, one may now be twice as valuable as the other. This relationship might reverse itself as economic conditions continue to unfold.

Clients may need to revise wills to reflect the new realities and subsequently monitor the value of such bequests as asset values continue to change. One option would be to continue to bequeath that vacation home to the son and the business to the daughter, and then use life insurance to equalize the bequests to each child, based on date-of-death values.

Declining Values

Fundamental market changes may also require revisions in trust funding. Taxpayers were allowed to bequeath up to $2 million in 2008, and may bequeath $3.5 million beginning this year, without incurring any federal estate tax liability. Many clients' wills bequeath some or all of this amount (called the "applicable exclusion amount") to children or other non-spousal heirs.

This may have been planned in anticipation that the surviving spouse would have resources that are more than adequate. That assumption should be revisited with current client financial projections in mind. For example, let's say that the value of your client's home and securities is half of what it was when this decision was made. The assumption that the surviving spouse would have adequate resources may no longer be valid.

For an estate worth $6 million in early 2008, the surviving spouse would inherit at least $4 million after the exclusion amount is bequeathed. If the client's net worth has declined to $4 million, though, and the client dies in 2009, the surviving spouse might receive only $500,000.

Tip: Help the client rethink her dispositive scheme. Prepare projections on how the numbers will play out now. The results may be telling. Titling (or ownership) of assets should also be revisited in light of recent market turmoil.

Common estate-planning steps for married couples include the recommendation to retitle assets to each spouse separately so that the estate of the first spouse to die can fund a bypass trust. This trust preserves the tax benefit of the amount each taxpayer is allowed to bequeath estate tax free.

Example: Jane and Harry have a joint net worth of $6 million. You advise them to divide assets equally so that whoever dies first can fund a $3.5 million bypass trust. Their house is worth $1 million; the rest of their assets are held in securities. The deed to the house is retitled in Jane's name and $2 million of securities—most of the equity allocation—are put in an account in her name alone. Meanwhile, Harry's account holds $3 million of securities, including all of the bonds and alternative investments.

But declines in equities and home prices have left Jane with just $1 million, while Harry's assets retained most of their value at $2.5 million. If Jane dies first, they'll forfeit a substantial portion of her exclusion. This could be costly even if the federal exclusion amount increases, because many states have lower thresholds for estate tax. Also, when the markets recover, the estate could become taxable despite the scheduled 2009 increase in the exclusion. Jane and Harry need to rebalance their ownership of assets.

When guiding clients through the division of assets, consider asset protection. At its simplest, this might entail retitling assets from the higher-risk to the lower-risk spouse. Re-titling might, however, run at odds with the tax goal of funding a bypass trust. Worries about lawsuits also need to be reevaluated in light of economic conditions.