Newsletter Category: Advisor Focused Newsletter

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. By having long-standing relationships with clients, you have unique insight into their financial background, goals, and anxieties. Perhaps more than any other professional, you can help ensure that their retirement plans and estate plans do not contradict one another. Clients worried about their health or their ability to care for loved ones want reassurance that their nest egg is enough to cover living expenses, medical bills, and more. The unique rules of retirement funds should be taken into consideration when making long-term estate plans. Income tax rules can complicate the wishes of your client. While assets may be set aside in trusts, naming a trust as the designated beneficiary requires the trust to have very specific provisions that comply with federal law and ensure maximum protection and stretch for the ultimate beneficiaries. Always review beneficiary designations with clients each time you meet. It can help ensure that their wishes are respected should they pass before your next review. Fail to do so, and your client’s loved one could be forced into court to contest the distribution while grieving. Retirement and estate planning should always be in progress. With no clear finish line in sight, you’ll want to prepare your clients for anything that life might throw their way. If you have concerns about how your clients’ retirement goals align with their estate plan, give us a call. We are here to answer any estate planning questions you may have and to develop a strategy that will help preserve the client’s lasting legacy.

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. Here are some tips for connecting with your clients’ stories and needs: Don’t assume you know what they’re about to say next. Each story is different, and even for those stories that seem the same, clients value feeling heard and understood. Ask questions. Get more details and a deeper understanding of what the client has shared. Pause to recap what the client has said, verifying that you’ve understood correctly. Rephrase what you’ve heard. Do Your Homework Once you’ve got the minutiae of your client’s requirements, it’s time to craft a custom solution that will help to secure the future for them and for their families for generations to come. Before you get started, though, research is imperative. Doing your due diligence will ensure that when you bring your solution to your client, it’s with confidence and readiness to get into the nitty-gritty. The more prepared you are, the better you’ll be able to explain the nuances of the plan. For example, if a client’s best bet is to pursue a charitable strategy with their assets, you’ll need to immerse yourself in the specific benefits of that strategy before moving forward with the client. Take a Holistic Approach When delving into complex financial strategies and solutions with clients, technical jargon shouldn’t be your first mode of communicating. Using images, stories, and real world examples instead makes you relatable to clients and encourages buy-in. A visual representation may help clients absorb the intricacies of a financial plan. Similarly, sharing an account illustrating a strategy or requirement similar to the client’s own may shed more light. These methods can provoke deeper dialogue and engagement. Everyone learns differently, and you’ll want to use all the available tools to be the best trusted advisor you can be to your clients. Work as a Team Your client’s advisory team is a valuable asset when delving together into complex solutions. Most strategies require alignment of investment, tax, and legal strategies to generate the greatest effect. Collaboration and the resulting synergy across plans means a more thorough strategy, a better informed client, and a superior outcome. The other members of the team are there to help make certain that a potentially confusing strategy becomes manageable and comprehensible for the client. You know the ins and outs of financial planning, and that’s what makes you valuable to your client. Be the best ally you can be to your clients by working with us to coordinate your client’s financial and legal plans. We’re here to help as you deepen relationships and help clients make the best choices for their futures.

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. Significant Changes in Wealth Setting your clients up for success with their trusts is not difficult. Keep an eye out for any significant changes in wealth. One such important development in a portfolio is the addition of a new account, such as an IRA or new taxable investment account. Any time a new account is opened, it’s imperative that you schedule a trust funding review. This review ensures that new accounts and any new sources of wealth are incorporated into the planning process. In some cases, a major overhaul is necessary, whereas in others it may only need to be notated on the trust’s schedule of assets. In any case, accounts must be funded properly into the trust if it is to work as intended, providing a sense of security and stability to generations to come. Any time you have helped a client open a new account, it is a good idea for us to have a discussion. Other New Assets You are often on the front lines for a client’s other acquisitions. Has the client withdrawn money to purchase a boat, RV, vacation home, new residence, or to start a business? Like a new investment account, each of these assets has unique ownership issues that must be considered as part of the client’s estate plan. Help your clients optimize their plans by looping us in when you are made aware of new assets. Is it time for a trust funding review? During a trust funding review, a comprehensive look is taken at the client’s plan. We take a 360-degree view of the trust’s terms and the client’s assets. A trust funding review is not a one-size-fits-all process. The scope and depth of a trust funding review will vary with the concerns of the client and the advisor. A basic review for a client with only a few changes may involve a phone call or brief meeting. On the other hand, a client with many changes (such as many new assets or a significant change in wealth) may be tantamount to the creation of a new plan since changes to the trust may be necessary. In either case, the best case of action is to get started on the funding review. The impact of a client’s changes—like new accounts, new assets, or changes in wealth—may be substantial. Be Prepared for Your Clients’ Benefit New accounts opened by clients during the course of the past year along with any other new assets must be taken into consideration during a trust funding review. Make sure your clients know they can depend on you and on their full team of qualified, experienced estate planning professionals to optimize their financial and legal well-being. You can put their minds at ease by reaching out to us to coordinate any necessary reviews. We are here to help.

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. Avoiding intestacy 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. Risk 1: Sub-Optimal Insurance Products Problem: Busy clients can put insurance product comparison efforts on the back burner and end up paying for it over time. If your clients’ premiums are higher than they need to be, it creates a financial burden — which can increase the potential for policy lapse. Solution: Comprehensive planning minimizes resource loss caused by inefficiencies. Review your clients’ insurance products and see how long it’s been since they’ve explored better options. Coordinate with us, as estate planners, to ensure that all policies have the proper beneficiary designations for the clients’ goals. Risk 2: Earned Income in Retirement Problem: If your clients are part of a growing trend of retired individuals continuing to work and earn income, they’re also opening themselves up to greater tax exposure in the process. Solution: It’s necessary to do a risk management assessment of what they’re earning, how it’s being taxed, and how we can strategize as a team to keep taxation on those income sources as low as possible. Risk 3: Obsolete Estate Planning Problem: Clients’ families may be in for an unpleasant surprise if the clients don’t have up-to-date wills and trusts. Outdated wills and trusts can lead to administrative inefficiencies, unnecessary probate, costs, and taxes, and, eventually, an exodus of assets from management when the process is complete. Solution: Discuss your clients’ wills and trusts to open up a line of conversation about whether their current plan aligns with their goals and vision. An easy starting point is a quick review of the plan summary or diagram. If there’s any doubt about whether the plan will work as the client intends, an in-depth professional review is a great idea. We are always happy to review plans and recommend improvements for your clients. Risk 4: Chronic Illness, Poor Family Health Histories, or Both Problem: Clients who are suffering from chronic health issues won’t be helped by burying their heads in the sand when it comes to financial and estate planning. If they fail to act fast, they can quickly drain their wealth through medical costs. Solution: With a long-term care funding plan, your clients dealing with chronic health issues can find comfort in the knowledge that their resources are being allocated wisely and that there’s less of a chance of their families being burdened in the future. Risk 5: Life Insurance with Substantial Cash Value Problem: Life insurance policies with significant cash values aren’t always the most effective route to take when other investment vehicles could provide for better growth. Solution: We can work with you to help your clients monetize their life insurance policies to support their income needs with improved tax efficiency. By taking advantage of tax-deferred growth, tax-free dividends, or policy loans in ways that align with the clients’ long-term financial and estate planning goals, we can help ensure your clients are getting the most out of their life insurance policies. Your clients may be in danger of experiencing the consequences of these risks without even being aware of them. Often, changes that lead to these types of risk take place so gradually that your clients haven’t considered them. Presenting these hidden risks can also help you cement your relationship with your clients and possibly win referrals and new business. As you discuss these risks with your existing and potential clients, please be in touch if there’s anything we can do to help.

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. Planning in a Fluctuating Political Climate Estate plans need to change when your clients experience any major life changes, such as marrying someone new or welcoming a child to the family. But clients also need to respond effectively to large-scale legal and economic changes that are external to their personal lives. Regardless of your political leanings, it’s safe to say the United States is experiencing a period of dramatic legal, economic, and political change. Elections like the 2018 midterms — and the resulting political change — often create fear and anxiety about how the impact of new laws and tax policy will affect your clients’ lives. You have undoubtedly seized the opportunity to help guide your clients toward the smartest financial decisions they can make in light of the results. When you help them navigate the ways the changing political landscape will affect their wealth, you’ll increase loyalty and retain more assets under management. The Midterm Split: Democrats Won the House, Republicans Kept the Senate Before the midterm elections, it was unclear how legislation like the 2017 Tax Cuts and Jobs Act would be affected. Now, we know that the House and Senate are split between Democratic and Republican control. As a result, the large-scale changes the Act brought may have an uncertain future. So what does a divided government mean for your clients? The budget reconciliation strategy the Republicans used to pass the Tax Act will no longer be a viable option, which could slow any additional tax legislation supported by the Republican-controlled Senate. According to Kiplinger, “What is likely off the table with a Democratic House and Republican Senate is tax reform 2.0, which would make certain provisions of the 2017 tax law permanent, locking in individual and small business tax cuts. Social Security and Medicare reforms, which might have helped offset the effect of the tax cuts, are also likely off the table.” Some Things Are Constant, No Matter Who’s in Charge Amid so much political uncertainty surrounding the midterm elections, it’s important for your clients to remember there are many foundational constants in estate planning that are important no matter who’s in charge politically or what the tax laws look like. As part of your clients’ financial wellness team, we’re staying on top of the latest developments and will be here to guide them in matters of estate planning. We’re constantly watching the situation and will keep you and your clients informed of relevant legal and tax changes. In order for your clients to grow and retain their wealth, careful estate planning is always a necessity — regardless of which party controls Congress. Many things may change, but a lot will remain the same: no one can legislate away irresponsible spending, divorce, lawsuits, bankruptcy, sibling rivalry, and the many non-tax reasons to complete estate planning. An up-to-date comprehensive estate plan remains the best option for passing along a client’s wealth and values to the next generation. We are here to help you and your clients in these changing times. Give us a call today.

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. 1. Bundle Gifts Together When your clients make relatively small gifts each year, there often isn’t enough to make those gifts tax deductible. That’s why it’s helpful to bundle gifts so the amount becomes deductible in one year. For example, if a client gives $10,000 per year, they can instead give $30,000 in one year and inform the charity that the gift is for three years. This way, the client is “prepaying” three years of annual gifts. Utilizing this larger amount, the client can now obtain the income tax deduction for the one year that the gift is made. Another option is to use a donor-advised fund (DAF) if a client isn’t 100% sure about which charities they want to support. These are similar to the private foundations established by the very wealthy, but they’re a more practical way to prepay gifts for people across the wealth spectrum. In a DAF, the client makes an irrevocable donation and receives an immediate tax deduction. Their gift then grows tax-free in the DAF. The client can then, at a later time, choose which charitable organizations to make grants to from the funds in the DAF. 2. Use IRA Rollovers and Other Retirement Plans Retirement assets have both lifetime and at-death planning opportunities. Because of the estate and income taxes that occur when IRAs are passed on to beneficiaries, they’re an excellent – and tax-efficient – way to include charitable giving in your clients’ estate plans. Instruct your client to designate a charity as a beneficiary on retirement plan assets (and leave life insurance or other property to family or non-charity beneficiaries). The charity will pay no income tax on the retirement plan or IRA proceeds, retaining the full value of the charitable gift. Let your clients know that donating their IRA value to a charity means bypassing loss of the IRA’s value through income tax as well, and they are likely to see the value in this resourceful strategy. During life, there are planning opportunities too. Clients over 70 ½ can use the IRA to charity rollover to avoid the entire income tax deduction issue since funds directly given from an IRA to a charity are not added to taxable income. This way, the client gets an income tax benefit whether they itemize or not because the direct distribution to the charity effectively bypasses your client’s tax return. 3. Use Charitable Lead and Remainder Trusts There are a variety of trusts that can provide significant benefit for your wealthy clients — especially if we work together proactively to plan the sale of an asset with significant gain. CLTs and CRTs are two notable examples. Charitable Lead Trust (CLT): CLTs are a type of irrevocable trust that can help your clients achieve their charitable giving goals by providing money to a charity over a set period of time without their assets being eaten away by taxation. Once the stated period of time has elapsed, the remaining sum can be passed onto their chosen loved ones or other beneficiaries. In a CLT, the charity receives money now and for a specified period of time and then the remainder is left for your non-charitable beneficiaries. Charitable Remainder Trust (CRT): CRTs are also a type of charitable trust. CRTs provide a stream of income to your client for a period of years or a lifetime, with the remainder going to the charity of their choice. Because of the tax benefits these trusts receive, they can be an excellent vehicle to convert highly appreciated assets into lifelong or retirement income for the right client while also achieving a clients’ charitable goals. For your clients who are interested in starting or continuing their charitable giving efforts, the Tax Act has likely caused a fair bit of confusion and concern about a loss of tax benefits. By using these strategies, we can collectively help realign your clients giving plans with the new legislative realities caused by the Tax Act. We are here to help and collaborate as key players on your clients’ planning team. Archive Advisor Focused Newsletter Estate Planning Pop Quiz Your Role in a Client’s Summertime Family Gathering Helping Clients Protect Themselves and Their Loved Ones This National Safety Month View All Client Focused Newsletter Estate Planning Pop Quiz Include a Family Meeting in Your Next Family Reunion Join Our International Inheritance Planning Round Table Discussion! View All

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 years.[1] 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. Here are five ways you can aid your clients in mitigating the financial toll taken by rising higher education expenses: 1. Counsel clients about avoiding gift tax issues with direct tuition payments By paying tuition directly to the educational institution itself, your clients can avoid losing a portion of their assets to the gift tax. This may seem like an obvious strategy, but it’s one that may not be top-of-mind for clients who are more accustomed to using complex financial products and might assume that the benefits of a trust would outweigh direct payment to the institution. 2. Discuss the new Section 529 rules of the 2017 Tax Cuts and Jobs Act The 2017 Tax Cuts and Jobs Act updated the Section 529 Qualified Tuition Programs rules. The changes expand the breadth of qualified expenses. A 529-eligible investment account could already be used for college tuition, textbooks, required supplies, and some room and board. Now, kindergarten through grade twelve expenses can be qualified expenses. There are still some areas of uncertainty and some new restrictions, including a new $10,000 per pupil limit on non-college expenses. For the right clients, these plans may offer some tax savings and can be a great tool to include in the overall education financing plan. 3. Explore revocable educational trusts Revocable educational trusts offer clients a way to stay in complete control of the money they are putting toward their children’s educations while still keeping it “set aside” for this purpose, as opposed to when they opt for UGMA and UTMA (Uniform Gift to Minors Act and Uniform Transfer to Minors Act) methods. In UGMA and UTMA accounts, the included assets are the minor’s property. With revocable educational trusts, however, your clients will remain in charge of the assets intended for their children’s educational expenses. If the client needs the money for another purpose, the trust can simply be revoked and the assets used for some other purpose. 4. Establish a HEET (Health and Education Exclusion Trust) Health and Education Exclusion Trusts are a great strategy for wealthy clients, especially grandparents. Assets given to grandchildren by their grandparents are generally subject to heavy taxes under the GSTT (Generation-Skipping Transfer Tax). The way a HEET bypasses this taxation is by leveraging a rule in the tax laws that exempts payments directly to medical providers and educational institutions and by including a charitable beneficiary. This technique allows your wealthy clients with grandchildren to accomplish both their philanthropic goals and their contributions to their grandchildren’s education in one planning maneuver. 5. Encourage prospective students to find scholarships early Lastly, encourage your clients to talk to their children about applying for scholarships early and often. Even if the prospective student is only a sophomore or junior, they should still begin looking into scholarship opportunities and planning accordingly. Although information about scholarships is widespread, applying for as many scholarships as possible is often an overlooked financing strategy. The question of how to best pay for their children’s college tuition is a stressful one for most clients. As their financial advisor, you have a great opportunity to substantially impact their approach in a way that will both help them achieve their goals and reflect positively on your skills in the process. If you have any questions about the finer points of the strategies discussed here or any other estate planning issue, please be in touch. We’re here to help you and your clients. [1] https://www.cnbc.com/2017/11/29/how-much-college-tuition-has-increased-from-1988-to-2018.html

Key Points to Discuss With Your Clients Like all things, tax laws are constantly changing. An important part of serving your clients is responding quickly and strategically to new developments in the tax law landscape. But at the same time, a knee-jerk reaction is rarely the best course of action—often resulting in unforeseen complications in the future. The best decisions are made by professional teams working together to analyze all angles of a situation to come up with the best strategy in response to the Tax Cuts and Jobs Act (TCJA), a historic amendment to the Internal Revenue Code of 1986. The TCJA affects many Americans in a variety of areas of life, and your clients might not be aware of what its impact will be on their long-term financial plan. Of course, this law is going on seven months old, but too many people struggle with taking action in their financial and tax planning lives, so the historic nature of these changes cannot be overstated. The law’s benefits will accrue most for those who take a proactive approach — rather than those who wait until the last minute. Here are several reasons it needs to be top-of-mind for both you and your clients: The increase in the standard deduction and the general lowering of individual tax rates means that your clients have likely been enjoying more take-home pay. The elimination of the personal exemption means that depending on your client’s marital status and number of dependents, they may not be able to lower their taxable income as much as they had in the past. Some clients may face a higher tax burden, as a result, even after taking into account the lowered rates. The limitations on deductions for state and local income taxes (SALT) means that for those clients in states or communities with high income taxes, their taxable income may not be reduced as much as it had been in the past because they cannot get credit for all the other forms of income tax they have paid. However, if any of your clients are concerned about this, we may have some strategies (such as Incomplete Non-Grantor Trusts) to help alleviate the new tax burden. The reduction of the alternative minimum tax for individuals means that fewer individuals must deal with this burdensome and often-complicated tax. With the increase in the unified credit to $10,000,000, adjusted for inflation, there has been a reduction in the overall number of estates affected by the estate tax. If your clients had previous planning centered around saving estate tax, those plans need to be re-evaluated to make sure that they are still working towards the client’s long term objectives now that estate tax may not be a concern. Your clients may also want to take advantage of the increase by making lifetime gifts, particularly if they had previously used up their exemption in previous years. With the effective repeal of the individual mandate of the Affordable Care Act effective in 2019, your clients will now have the choice of whether or not to carry health insurance coverage without suffering the penalty of a fine. However, with no requirement for coverage, it is speculated that the cost of insurance in the marketplace could increase without the additional participants. Clients should carefully balance the costs of paying for their own healthcare against the cost of maintaining insurance, even after the mandate is gone. The new tax developments are especially pertinent to your business-owning clients. With the possible 20% income tax deduction for pass-through entities, they’ll want to review entity selection for their business operations as soon as possible. Now is also the time to consider gifting of interests to reduce the limitations inherent in the qualifying business income calculation and to utilize the increased gift tax exemption. For clients with “specified service businesses,” such as attorneys, doctors, dentists, and consultants, it makes sense to consider separating any “non-service” businesses out of their service business, such as real estate or clerical activity. Utilizing multiple trusts may also help to facilitate business-owner clients achieve a larger QBI (qualifying business income) deduction. Planning Goes Beyond Taxes Too The implications of the TCJA go much further than taxes alone. Your clients will always need extensive guidance around asset protection, privacy, retaining control, avoiding issues like guardianship and probate, and ensuring that their loved ones are cared for for years to come. These aspects of financial and estate planning are constant regardless of fluctuations of tax reform. Clients who haven’t considered these issues should discuss them with an estate planning attorney as soon as possible. These are sophisticated, complex, and multi-faceted planning strategies. For the right client, they can save tens of thousands of income tax. But they can cost dearly if implemented incorrectly. For this reason, collaboration with us and the rest of your clients’ financial team is increasingly indispensable for success. Help your clients plan for whatever comes next with the guidance of a well-rounded advisory team. Archive Advisor Focused Newsletter Estate Planning Pop Quiz Your Role in a Client’s Summertime Family Gathering Helping Clients Protect Themselves and Their Loved Ones This National Safety Month View All Client Focused Newsletter Estate Planning Pop Quiz Include a Family Meeting in Your Next Family Reunion Join Our International Inheritance Planning Round Table Discussion! View All

How You Can Keep Claims From Threatening Their Property Most of us do not expect to be sued. However, lawsuits are filed every day the courthouses are open. If your clients’ estate plans don’t include adequate asset protection, they could end up losing a substantial amount of their wealth in the event of a claim – even a “frivolous” one. It’s well worth talking to your clients about what asset protection strategies their current plan includes. Many existing plans may need a revamp, while other clients will need to implement a new plan entirely. Shielding their assets and property against legal claims takes sophisticated planning and teamwork. We’re here to help you develop a tailored asset protection strategy for each of your clients. Several issues and strategies merit examination in your asset protection conversation with your clients. Domestic Asset Protection Trust (DAPT): DAPTs can protect your clients from a legal claim that may arise in the future by allowing them to place their assets into a special trust that protects them from the reach of a creditor. DAPTs aren’t available in every state, and the most popular states for DAPTs are Alaska, Delaware, Nevada, and Wyoming. DAPTs are a sophisticated strategy that’s not right for everyone. But, for the right clients, they are a potent tool for protecting assets. Like any sophisticated legal and financial strategy, it’s best to work with a team. Planning Tip: Another option is an offshore asset protection trust established under foreign laws. However, placing your clients’ assets out of the U.S. adds significant tax reporting burdens. Also, court orders for asset repatriation can lead to a client being held in contempt of court. Because of the ongoing tax compliance, fiduciary fees, and overall complexity of these foreign trusts, offshore planning is usually not a great option for most clients. Lifetime Trusts: Lifetime trusts protect your clients’ beneficiaries’ inheritances. Think of this tactic as asset protection for the next generation. Although it does not provide any asset protection benefit for your current clients, these trusts can secure the financial well-being of their children after they’re gone. Additionally, assets left in lifetime trusts need long-term management, providing you a valuable opportunity to be introduced to and work with the next generation. Inheritor’s Trusts: Inheritor’s trusts are an excellent choice for clients who expect to receive an inheritance. Rather than acquire assets outright or through a less-than-ideal trust set up by their family (usually parents or grandparents), your clients can strategically secure their inheritances with this type of trust. These trusts work best when they are coordinated with the client’s overall plan. Any client – especially well-off ones – expecting a large inheritance should consider this option. Risk Management Planning: Setting up a corporation, LLC, limited partnership, buying appropriate insurance, negotiating contracts effectively, using retirement plans and other exempt accounts, and other strategies are all part of what we could call risk management planning. Some of these may be built into your clients’ estate plan while others may be part of your client’s business plans. Many clients have not taken the time to develop a risk management strategy fully, but it is well worth the effort since many of these strategies are “low hanging” fruit, especially compared to more sophisticated strategies like DAPTs. No matter what kind of asset protection strategies you help your clients implement, make sure they don’t sleep on it. Planning of this type should not be delayed or neglected. Effective strategies like these only protect your clients when they’re put into place early enough — well ahead of a lawsuit, credit claim, or bankruptcy. For clients who have already implemented one or more strategies, it is also a great time to review and ensure the plan will work as expected. Many trusts – even “irrevocable” ones – can be modernized (and their benefits possibly enhanced) using tools like a modification or decanting. Of course, the traditional concerns of estate planning, such as client privacy, freedom to determine who will be in charge of their assets, and reduction of income and estate taxes, must be addressed. Asset protection lets you improve your value to clients by enhancing client control over their property. Planning tip: The Tax Cuts and Jobs Act of 2017 also impacts your clients’ asset protection needs. Far fewer individuals and married couples will have to pay inheritance taxes because of it. However, it also means that lawsuits — even “frivolous” ones — can still spell trouble for your clients. Bankruptcy and divorce can also come into play here, so protective planning to protect and preserve assets is extremely important, even as estate taxes have receded in importance. We’re here to help you and your clients. Your clients trust that you have the expertise to guide them toward their financial goals, and that often means pulling an estate planner into the conversation as part of their team of experts. Give us a call today to chat about how we can build asset protection into your clients’ plans.