Since the enactment of the Tax Cut and Jobs Act of 2017, the utility of the irrevocable life insurance trust (ILIT) has been in question. The substantial increase in the federal estate tax exemption–$11.4 million for an individual and $22.8 million for a married couple in 2019—greatly reduced the need for estate planning aimed at lessening federal estate tax liability or offsetting estate taxes for many clients. As a result, your clients may be wondering if an ILIT is necessary.Continue Reading…
The 2019 estate tax exemption is $11.4 million per person, up from $11.2 million per person in 2018. According to the Tax Policy Center, only 4,000 estate tax returns were filed this year, with only 1,900 of those returns owing tax. Some industry experts estimate that less than one percent of all estates are taxable. Put another way, over 99 percent of all estates are exempt from estate tax. With the likelihood of clients having a taxable estate being relatively low right now (this is subject to change, of course), it only makes sense that clients focus on income tax planning. As a trusted advisor, you hold a crucial role in ensuring that our clients receive the best comprehensive strategy.Continue Reading…
If there’s one thing we can all agree on, it is that each client is unique.
Likewise, our approach to counseling these clients should be tailored to each one’s specific needs.
Let’s work together to develop special plans that fit each client’s special circumstances.
One key tool to consider is the niche trust.
Usually, when we speak about a trust, we mean an “express trust.” An express trust is a three-way relationship between the grantor, the beneficiary or beneficiaries, and the third party, or trustee. The grantor has assets he or she wishes to distribute in a specified way to the beneficiary, and the trustee holds those assets on behalf of the beneficiary.Continue Reading…
Prevention Is the Greatest Cure
Your clients trust you with their financial future and the legacy they want to leave behind. They rely on you to anticipate challenges, foresee trouble, and take preventative measures. When it comes to a client’s financial wellbeing, it is up to the trusted advisor to know what problems are likely to arise and to have solutions ready to help avoid conflict in the family, waste of resources, and other common pitfalls.
One crucial tool to keep assets safe and to ensure they are distributed in the way your client wants is through the use of a revocable living trust.
For maximum benefit, estate planning should happen as a team effort, with CPAs, insurance professionals, financial advisors, and attorneys working together strategically and cooperatively. When it comes to helping married couples plan, today’s strategies need to be considerably more thoughtful than in previous years. Although the estate tax exemption is ever increasing, portability is still an important option, particularly for high net worth clients.
Retirement accounts are designed to help make the transition between working and retiring easier. They provide a steady stream of income for retirees who are suddenly without take-home pay for the first time in their lives. These accounts require extra planning and consideration since, unlike other assets your clients may have, retirement account distributions are subject to income tax for the account owner and the designated beneficiary after the owner’s death.
It is important that any plans for retirement match up with the plans a person has for their estate. Of course, planning for retirement assets is often motivated by different goals than estate planning because of income taxes. It is critical that financial advisors take the opportunity to talk with their clients about the differences when meeting for a review of their plans.
Estate planning is a complex, nuanced process. Properly done, it requires a specialized team of experts in investment, tax, and legal strategy. At its center, however, is the client and their particular needs, hopes, and goals. It’s vital that over the course of working together, you engage your client and help them gain comfort and understanding of the process. Delving into a client’s plan together is a great opportunity to interact more closely.
Be an Active Listener
As an experienced financial advisor, you may feel as if you’ve heard and seen it all. But every client is unique. Each one’s story, background, goals, hopes and fears are different, and it’s up to you to ensure you’re getting all the necessary information before proceeding with the next steps. If you’re not entering client consultations with the goal of being an active listener, you could be setting yourself up to miss critical details.
As a financial advisor, what could be more important than the financial health of your clients?As you know, a comprehensive trust-centered estate plan allows your clients to provide for loved ones, affording them immense peace of mind. But, estate planning is not a one-time event since trust-centered estate plans require careful supervision and regular reviews to function properly. Accordingly, it’s crucial that you participate in the maintenance of your clients’ trusts by monitoring important financial changes and helping clients to update their plans to reflect these changes.
How to Tailor the Conversation to Their Goals
Financial advisors often have a clear path to starting the estate planning discussion when their clients have children, as many estate planning discussions center around clients’ objectives for passing their wealth, properties, and legacy to the next generation.
Because of this traditional emphasis on the next generation, individuals and couples without children can easily arrive at the conclusion that they don’t need the same level of detail in their own plans or, worse yet, that they don’t need a plan at all. Nevertheless, there are several ways to help estate planning resonate with individuals and couples who aren’t parents.
Reframe the planning conversation
You can keep these clients engaged and help them find fulfillment by shifting your message away from discussions about bettering future generations and focusing instead on ways to plan for life, the future, and a legacy. Remind them that estate planning deals with a wide range of important issues like ensuring trusted people can make decisions if the client is unable to do so because of illness, incapacity, or death, and supporting meaningful causes they care about.
Planning for flexibility and the future “what-ifs” of life is important for young, child-free clients. Working successfully with these clients involves helping them pinpoint their core motivations and goals regarding their wealth and legacy. Ask them to reflect on the following questions:
- Why are you saving and investing?
- What do you want to accomplish during your life?
- What legacy do you want to leave?
- What impact do you want to leave?
Exploring these topics helps clients without children become engaged in estate and financial planning.
Think upstream for younger clients
Rather than directing their assets toward their descendants, some clients, especially young, single, and child-free clients, may be inclined toward transferring their wealth “upstream” to their parents or grandparents.
Issues arise, however, when these plans are not optimized for the issues faced by older beneficiaries. Certain estate planning solutions can help them make a positive impact on their older loved ones’ lives in regards to Medicaid, asset protection concerns, and blended families. Clients who want to leave their wealth “upstream” must discuss their goals with an estate planner to ensure the plan will work as intended.
An emphasis on philanthropy
Charitable planning may be more prevalent for clients without children. This is especially true for older individuals who have built lifelong connections to a particular passion that they’d like to support. Talking to these clients in terms of their potential for creating a positive impact is a helpful strategy for all parties involved.
In many cases, a comprehensive plan may be a better strategy than simply naming a favorite charity as a beneficiary on an investment account. One of the biggest risks these clients face is that they often assume that a simple plan is the best, but that assumption may, sadly, limit the opportunity they have to leave an impact.
Clients rarely want their assets ending up with a distant relative or being claimed by the state, and will appreciate developing a plan that’s meaningful to them. When an individual dies without leaving a will, this is referred to as “dying intestate.” This scenario brings with it a number of complications, as the state legislature has essentially written the client’s estate plan for them. For clients without children, this is often not the estate plan they would have selected.
Different generations take different approaches to life, and your likelihood of working with more childless clients is increasing. The birthrate in the U.S. has been low for decades, but there were record low fertility rates in 2017 and 2018, as many millennial women and couples are choosing to delay or avoid parenthood.
Helping these clients define clear, personal goals for financial and estate planning is an excellent way to add value to your financial planning services and engage with this growing demographic. Let’s schedule a quick discussion to cover other ways you can build trust and increase engagement with your clients. Give us a call today.
How to Steer Your Clients in the Right Direction
Estate planning provides your clients with a wealth of opportunities to strategically grow their net worth while also planning for their families’ future comfort and security. Opportunity brings risk, but also the potential reward of deeper, longer-lasting client relationships.
Educational Topics for Your Clients That Can Help Your Business
What you don’t know can end up hurting your clients, and in turn, limit your ability to secure future business opportunities and retain assets under management. That’s why it’s important to learn about and discuss the potential estate planning risks faced by your clients.
When you discuss the value of estate planning and these hidden risks with your clients, you strengthen your professional relationships, build long-lasting trust, and help clients maximize their financial well-being.