Exposing the Myth of Estate Planning

Go to any estate planning conference, list the topics discussed, and then record the time dedicated to each.  Chances are that most of the time, if not all, will be spent addressing elements of the transfer tax code and strategies for implementing their impact.  The Applicable Exclusion Amount, The Applicable Credit Amount, Annual Exclusion gifts, A-B Trusts, QPRTs, GRATs, ILITs, etc. – such are the topics you are likely to hear about.  These topics are so pervasive in estate planning discussions that they have led to the commonly perceived myth that the purpose of estate planning is to minimize transfer taxes.

The fact is that the primary purpose of estate planning has never been to minimize taxes.  Its purpose has always been to help clients achieve personal objectives in the most effective and efficient manner possible.  The problem has been that, until recently, transfer taxes were impacting more and more Americans.  This led to a growing concern over planning for those taxes.

One of the side effects of the 2010 Tax Act has been to expose this myth.  Now that individuals can exclude $5,000,000 from federal transfer taxes ($10,000,000 for married couples), the vast majority of Americans no longer need to be concerned about federal transfer taxes.  Despite this fact, estate planning continues to be a primary concern, even for Americans of rather modest wealth.  The focus of many planning discussions, however, has shifted to adopting strategies to effectively transfer assets in a manner that best accomplishes the client’s personal objectives.  Actually, this should not have been a shift at all.  This has always been the objective.  It is just that when the tax exclusion amounts were so much lower, and taxes were a more pervasive threat, the public became obsessed with the idea of planning for taxes, never stopping to ponder the fact that taxes were only considerations to the degree that failure to plan for them might retard the client’s personal objectives for their wealth.

This changed environment simply highlights that there needs to be more balance in how professionals approach the prospect of estate planning.  There needs to be more emphasis on skills that go beyond understanding and adapting to the tax codes; greater emphasis needs to be given to interpersonal and advisory skills that more effectively help clients identify and express their true intent and desires for the transfer of their wealth. In this regard, the more important skills are those like:

  • How to help clients identify their primary goals
  • How to ask good questions that surface their real concerns and fears
  • How to raise issues that need to be considered, like the impact of death or disability, in a manner that helps clients visualize the impact upon their goals if they fail to plan, thereby motivating them to action

These are the skills that often make the difference between a plan that merely minimizes what gets paid to the IRS and plans that put their minds at ease and effectively address their concerns.  That’s why we place so much emphasis on these skills when we develop training solutions.

In short, the next time you are planning to attend an estate planning conference or plan to participate in a training program, look carefully at the agenda.  Do you see a balanced approach that will help you be more effective with clients, or do you see the same old bias that never looks beyond the taxes?

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