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.
Estate planning is an ongoing process, not a one-time transaction. While your core objective is to help your clients remain financially sound in the face of whatever comes their way, our core objective is to ensure a client’s estate plan works when it needs to.
Strategies Your Clients Can Use Right Now
It may seem too early to talk about year-end planning. But the 2017 Tax Cuts and Jobs Act set many changes in motion for charitable giving. Whether a clients’ charitable giving stems from a concern for those who are less fortunate, the desire to support a particular cause, or an endeavor to gain recognition in their community, the changes to the income tax deductions will likely impact the charitably inclined.
The increase in the standard deduction ($12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples) means far fewer people will itemize (a requirement to obtain the charitable deduction). Additionally, the $11.18 million estate tax exemption per person means far fewer people have taxable estates now than before the act came into effect. Because of the general reduction tax in tax liability after the Tax Cuts and Jobs Act, charitable planning no longer has the same tax-saving benefit it once did.
Even against these headwinds, there remain actionable solutions you can implement with your clients to maximize their charitable giving results. When you share these solutions with charitably-minded clients, you enhance the value you provide and deepen your relationships.
Tax-Saving Opportunities for Business Owners
Are any of your business-owning clients curious about the new Section 199A deduction?
Although the deduction became effective on January 1, 2018, guidance on how it would be calculated was delegated to the Internal Revenue Service (IRS) by Congress. For months, financial and tax professionals have speculated about various aspects of this new deduction since Congress gave us little concrete guidance to work with.
New Developments in August 2018
5 Strategies to Help Pay for a Child’s Academic Future
Higher education costs are just that -higher. The steady increase in educational expenses means your clients have much steeper bills for their children’s college tuitions than they had for their own. To illustrate how stark this contrast is, the average cost of tuition has increased 213 percent in the last 30 years1. To make matters worse, there is no end in sight for this trend.
It’s understandable that the price of higher education is one of the biggest worries looming in your clients’ minds. A defined goal, such as a large purchase or a child’s educational needs, provides much more motivation to clients than an amorphous, abstract goal.
As their financial advisor, you are uniquely positioned to help your clients utilize educational savings tools they may not otherwise be familiar with. Not only will this effort help your clients —it’ll also lead to greater trust in your ability to help your clients strategically position themselves for better financial outcomes overall.