How new tax laws have changed the estate planning paradigm

Nov 8, 2013 @ 12:00 am

Runtime: 3:30

Martin M. Shenkman talks about how the recent changes to tax law have made estate planning as much an area of interest for advisers as estate planning attorneys.

Video Transcript

The new tax law, the American Taxpayer Relief Act of 2012 and acted in 2013, a little interesting tidbit from Congress, '12 Act, '13 like everything else that happens in Washington. The 2012 Act changed the planning paradigm and I believe for pro-active and astute financial advisors, wealth managers, they can take over and become the primary catalyst in quarterback for the estate planning team. Up until now, that role has almost universally been played solely by the estate planning attorney. Why is this massive change taking place? For the vast majority of even wealthy Americans, the new high permanent inflation-adjusted exemptions it's now 125 million in 2013 for per individual, 10.5 million for couple. Those were user inflation adjusted. So unless the client is exceeding those ranges, they're not gonna face the federal estate tax. So the fear of the estate tax, which is the really prime driver to get people into an attorney's office to do a estate plan, it's gone. It's gone. So whereas in the past, clients really regularly did go back to their estate planning attorney to address planning because their wealth could be wiped out on debt. That fear is gone. So what I think is gonna happen going forward 'cause it's only what I called sort of natural events, organic events that are gonna push a client to their estate planner birth, death, divorce, marriage. One of those common events-- Gee, I got to update it. Well, I had my first kid. Okay, that's obvious. The fear factor is now gone. But organic events, the client is not gonna run to their estate planner. But yet, every wealth manager or investment advisor meets minimal annually with their client. Many of them meet quarterly and depending on the client maybe more often. So now for the first time, it's really the wealth manager that's gonna be in the position to have the estate planning conversation with the client. So for the astute and pro-active wealth manager, they can now be the ones referring the client to the attorney. In the past, I used to have all the wealth managers' calling to take-- to take me out to lunch to all of our friends and clients and I hope they continued. They shouldn't listen to this. But I think going forward, it's gonna be the attorney's running after the wealth managers for the clients. Now, wealth manager being in that position there's so much more they can do. And for many clients and I said this in an another clip, but I wanna repeat it 'cause I think it's a dramatic paradigm shift for the vast majority of wealthy clients given this new high federal exemption amounts. The income tax is the new estate tax. So, how you plan your investments, tax-efficient investing, putting money asset classes in the right locations, the right investment buckets, whether it's an RIA that's income tax free, whether its assets and a bypass trust controlling appreciation, those are within the realm of the wealth manager, not the attorney. So even when the estate plan is done, the wealth advisor will have a far greater and more important role in making that plan succeed than ever before in the estate planning history. So, I think it's an exciting opportunity and I think for those wealth managers that really capitalize on it, it's a great new role for them to play, a very pro-active role. And for the client's best interest, if the wealth manager when they meet annually or quarterly is not encouraging and falling up on a estate planning, nobody is gonna do it.


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