Death tax dead, but wealthy clients standing by

Feb 5, 2010 @ 10:11 am

By Sara Hansard

The temporary suspension of the estate tax is not spurring high-net-worth Americans to take action on their estate plans.

Indeed, 82% of CPA financial planners surveyed in January by the American Institute of Certified Public Accountants said their clients are taking a wait-and-see attitude toward estate tax planning. The reason for the lack of action is rampant speculation that Congress may reinstate the tax retroactively.

The survey yielded some other interesting nuggets as well. Fifty-eight percent of the planners said that anticipation of higher tax rates is most likely to trigger clients' conversions of traditional individual retirement accounts to Roth IRAs. In fact, over half reported that they are advising clients to pay tax on Roth IRA conversions this year, despite an Internal Revenue Service allowance for spreading the tax out over three years.

About 62% of the respondents said their retirement age clients are postponing retirement for one to five years. Likewise, nearly nine out of 10 of the polled CPAs said their clients are spending less money due to the prevailing economic climate, and 54% said their clients are not confident in the market.

Three out of four said their clients, who typically have assets between $500,000 and $5 million, have grown more risk-averse in their investment decisions in the past year.

“Regardless of net worth, every American has to make it a priority to understand how the prevailing climate, whether it's good or bad, affects individual personal finances,” Clark Blackman, chairman of the AICPA's Personal Financial Planning Executive Committee, said in a release.

The survey “shows that wealthy investors still feel nervous about the stock market and are being conservative in their investment decisions,” he said.

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