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In their April 18 presentation, “Ask the Experts: Estate Planning Q&A for Financial Advisors,” Sandra Glazier, Martin M. Shenkman and James I. Dougherty gave an overview of some of the important estate-planning proposals included in the 2024 Greenbook, warning financial advisors to prepare their clients for possible changes, and touched on many pressing questions submitted by financial advisors.
The Greenbook
As many in the industry are aware, the administration’s Greenbook proposals are particularly harsh when it comes to estate-planning strategies. Our presenters warn that the worst thing advisors can do is sit back and assume that nothing can be enacted with a Republican House. Instead, key takeaways include taking at least minimal steps as soon as possible to mitigate any potential future setbacks to clients.
Specifically, key changes highlighted by our experts include: (1) the annual exclusion being changed from $17,000 per donee to $50,000 per donor; (2) complex changes in the area of the generation-skipping transfer (GST) tax, making GST transfers available to beneficiaries no more than two generations below the transferor and to younger generations who are alive at the creation of a trust; and (3) new burdensome reporting requirements for trusts, not unlike those imposed by the Corporate Transparency Act.
Examples of actions to take now include making sure a client has a grantor trust in place (“trusts are a big part of the answer to planning and addressing important needs,” according to Shenkman) and taking asset protection planning steps to protect clients from any malpractice, creditor and divorce claims, especially in our litigious society. They specifically warn that waiting too long for asset protection planning will render it too late to be effective and put you and your client at risk of a claim of fraudulent conveyance. Additionally, our panelists recommend those with ultra-wealthy clients, particularly those with hard-to-value assets such as businesses and real estate, to take proactive steps to plan ahead for any potential changes as a result of these proposals. They stress that financial advisors are in the best position to put forth these ideas to clients and get the ball rolling.
Importance of Wills
The presenters also discussed the importance of having a will, even when there’s a revocable trust in place. As Shenkman so eloquently phrased it, “when there’s a will, there’s a way.” Not only does a will not come at much of an additional cost, but also, it addresses any leftover assets not provided for by the revocable trust. Not to mention, a will is necessary if your clients want to name guardians for minors.
Other Issues
Next, our panelists turned their attention to discussing how financial advisors might be in a good position to help clients organize important documents relating to implementation of their estate plan. They followed that up with a conversation on planning options for disabled children, with Glazier pointing out that it’s important to remember that a disability can also occur later in life. “Being proactive and thinking about these issues and addressing them in the estate planning context can help protect assets in the case a disability arises at any point in time,” she posits. Shenkman added that the financial advisor plays a critical role in addressing any potential tax consequences of planning for a disabled child. It’s also important to think about and address a situation in which a caregiver himself becomes disabled.
On the topic of potential GST and other planning issues related to IRC Section 529 accounts, Dougherty suggested that financial advisors: (1) consider any tax issues of changing beneficiaries; and (2) avoid highly over funded Section 529 accounts. The presentation went on to touch on many important topics, including planning considerations for unmarried couples and the importance of dynasty trusts, the latter of which was highlighted as a huge opportunity for financial advisors, and discussing with clients the possibility to decant old trusts that are about to be paid out to heirs into dynasty trusts to preserve tax and asset protection benefits.
To view the presentation, click here.
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