While retirement plan advisers are not estate planning professionals, per se, the “great wealth transfer” has pushed plan advisers farther into the conversation. As $124 trillion stands on the precipice of transfer by 2048, advisers are increasingly guiding clients through processes like writing wills, setting up trusts and arranging charitable donations.
However, with estate planning products rapidly evolving, advisers will need to master how certain evolutions and practices could affect clients in transferring wealth.
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Tax Essentials
For example, Will O’Rourke, a financial adviser and estate planning attorney at Prime Capital Financial, says advisers should become more familiar with the tax considerations of estate planning.
“Advisers need to get clued in on estate taxes [and] inheritance taxes. … There are federal inheritance taxes, and then there are state level inheritance taxes,” O’Rourke says. “[But] estate taxes are not a problem for a lot of people. You’ve got to be approaching the $15 million-net-worth mark.”
O’Rourke also stresses the importance of understanding the differences between how irrevocable and revocable trusts are taxed.
An irrevocable trust may be treated as a separate taxable entity, depending on its structure. In some cases, the trust or its beneficiaries may pay taxes on income and investment gains, which can reduce the amount ultimately transferred to heirs.
In contrast, a revocable trust remains under the grantor’s control and can typically be modified or revoked at any time.
“An irrevocable trust may not be the most tax-advantaged vehicle during your lifetime if you have other options,” O’Rourke says. “A lot of tax creates a lot of drag on portfolio.”
How Tech Can Help
O’Rourke says advisers should also incorporate artificial intelligence into their estate planning. He uses Wealth.com and eMoney, both AI-powered fintech platforms, to streamline tasks such as understanding client asset structures.
“Before I meet with the client, what I’ll do is: I’ll … integrate the eMoney information into their Wealth.com profile so then I can see all assets … and go through it with the client during the meeting, just to make sure that nothing’s missing.”
This week, a separate advisory firm and estate planning platform announced a strategic partnership. Callan Family Office LLC is providing its ultra-high-net-worth clients with tools from Vanilla Technologies Inc. to be used for desired estate planning needs. With the great wealth transfer underway, there is increased potential for more estate planning and firm collaborations.
“Ultra-high-net-worth families often have complex needs and intricate estate structures that are genuinely hard to fully understand and stay on top of,” Vanilla CEO Gene Farrell wrote in an email to PLANADVISER. “Technology is helping advisers build and manage estate plans more effectively, and it’s making estate planning more accessible for clients overall.”
O’Rourke says it is crucial for firms to take advantage of the potential returns from estate planning.
“It’s a virtually untapped vertical or line of revenue, for the most part, and a good model for the really successful [registered investment advisers] out there,” he says. “If you look at the really big ones, they’re all doing it effectively.”
