{"id":9072,"date":"2023-10-12T08:00:07","date_gmt":"2023-10-12T08:00:07","guid":{"rendered":"https:\/\/emoneyadvisor.com\/blog\/?post_type=thought_leadership&p=9072"},"modified":"2023-10-09T19:02:32","modified_gmt":"2023-10-09T19:02:32","slug":"estate-planning-research-reveals-3-blind-spots-advisors-can-address","status":"publish","type":"thought_leadership","link":"https:\/\/emoneyadvisor.com\/blog\/estate-planning-research-reveals-3-blind-spots-advisors-can-address\/","title":{"rendered":"Estate Planning Studies Show 3 Blind Spots Advisors Can Address"},"content":{"rendered":"

An overwhelming majority of clients (93 percent) want estate planning advice from advisors, yet only 22 percent are getting it.1<\/sup><\/p>\n

That may be because providing advice on a client’s estate plan requires\u00a0candid conversations<\/a>\u00a0that can be challenging to navigate.<\/p>\n

Family dynamics can be tough, and talking about death is a taboo in our culture. So it’s no surprise that only 38 percent of all advisors are comfortable talking about\u00a0estate and legacy planning<\/a>, eMoney research shows.2<\/sup><\/p>\n

However, when advisors avoid estate plan reviews, blind spots can develop. Using technology such as a vault where clients can share their estate plans securely is the first step. Once you have an estate plan in hand to review, keep in mind these three common scenarios where advisors can play a key role in helping clients avoid negative outcomes.<\/p>\n

#1: Heirs Who Are in the Dark<\/h2>\n

Research shows high-net-worth clients often fear they’ll create a \u201cmonster” by leaving someone a substantial inheritance, instilling a sense of entitlement. Nearly 20 percent of clients noted this as a negative outcome they’d like to avoid.3<\/sup>\u00a0Another concern might also be that their estate plan splits assets unevenly among relatives, and once they’re made aware of that it will spur litigation and family infighting. A 2023 report shows that is a worry for 27 percent of consumers.3<\/sup><\/p>\n

There are proactive steps that clients can take to prepare their heirs and share their motivations for wealth transfer. Advisors can help lead a\u00a0family meeting<\/a>\u00a0that allows a matriarch and patriarch to share the values they’d like to pass down along with the assets. A modest 26 percent of investors surveyed by Cerulli think their heirs could be deemed \u201cvery well informed” about their intentions for their wealth.4<\/sup>\u00a0The fact is, even with the proper amount of estate planning, it’s common that crucial family members are left out of the conversation due to their financial socialization and an unease of discussing finances in the household.<\/p>\n

With family harmony so crucial to many clients, it’s important that advisors encourage and even lead family discussions about wealth transfer sooner rather than later.<\/p>\n

#2: Financially Immature Heirs<\/h2>\n

Clients may bring up concerns that a potential heir is too young and inexperienced to handle a large sum of money during a review. In this case, advisors can recommend exploring strategies that put guardrails on an inheritance, such as a trust, and then coordinating with a client’s attorney. When a trust, instead of an individual, owns the assets, it can protect the inheritance from creditors, bankruptcy, or a divorcing spouse.<\/p>\n

If your client would like to encourage a young heir to get a college degree, there’s an incentive trust structure that can help them. Another route is an age-based trust that begins payments when the beneficiary reaches a certain age.<\/p>\n

Then there is giving while living, which 65 percent of Americans now favor.5\u00a0<\/sup>Clients are distributing an average of 30 percent of their estate during their lifetime in order to see its impact and help direct where the money might go.5<\/sup>\u00a0For example, gifting cash for the down payment on a home could ultimately be the right solution for a client worried about how a young heir might spend their inheritance.<\/p>\n

#3: The Estate Tax Bite<\/h2>\n

About 20 percent of consumers fear excessive taxation of their estates, saying a decrease in assets for heirs would be the worst effect of a poorly planned estate strategy.\u00a01<\/sup><\/p>\n

Because estate and inheritance tax laws, both state and federal, are subject to change, estate planning must be updated regularly to avoid the above situation. Fortunately, financial planning platforms with advanced techniques can help advisors analyze their clients’ expected estate tax bill and suggest working with an attorney for adjustments to the plan as needed.<\/p>\n

With the federal estate tax exemption scheduled to be cut in half at the start of 2026 unless Congress extends it, this is a topic to stay current on. For 2023, the gift and estate tax exemption amounts to a generous $12.92 million for individuals, or $25.84 million per married couple.<\/p>\n

State-level estate taxes are also something to keep an eye on for clients\u2014especially for those who have recently moved. Baby Boomers and Gen Xers moved more than any other age cohort in 2022, at 55 percent of moves, a United Van Lines study showed.6<\/sup>\u00a0The second most popular state to move to was Oregon, where a 10 percent to 16 percent tax rate applies to estates above $1 million, with some\u00a0exceptions<\/a>\u00a0recently added. It has one of the lowest estate tax exemptions in the nation. Some states, such as Maryland, have both an estate tax and an inheritance tax to keep tabs on.<\/p>\n

Trusts and giving while living can help in these cases as well. Finally, there are several options for clients who would prefer to use\u00a0charitable giving strategies<\/a>\u00a0to reduce the size of their estates.<\/p>\n

A Guide to Illuminate the Path<\/h2>\n

Many tools are at your disposal to assist your clients in organizing their affairs and preparing for the future they’ve envisioned.<\/p>\n

To dive deeper into this subject, consult our eBook,\u00a0Candid Conversations: Estate Planning<\/i><\/a>. This resource equips financial planners with practical methods and strategies for discussing estate planning, complete with examples and sample dialogue.<\/p>\n

Sources:<\/p>\n

1.\u00a0Spectrem Group.<\/i>\u00a0\u201cMarket Insights 2022,” June 2022.<\/p>\n

2. eMoney Leading with Planning Research, May 2022, Advisors n=360.<\/p>\n

3.\u00a0Vanilla<\/i>. \u201c2023 State of Estate Planning Report,” September 2023.<\/p>\n

4.\u00a0Cerulli Associates.<\/i>\u00a0\u201cThe Cerulli Edge, U.S. Retail Investor Edition,” February 2023.<\/p>\n

5. Merrill Lynch \/ Age Wave. \u201cLeaving a Legacy: A Lasting Gift to Loved Ones,” June 2019.<\/p>\n

6.\u00a0United Van Lines<\/i>. \u201cAnnual 2022 United Van Lines National Movers Study,” January 2023.<\/p>\n

 <\/p>\n

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.<\/p>\n","protected":false},"author":98,"featured_media":9074,"template":"","thought_leadership_cat":[94,97],"class_list":["post-9072","thought_leadership","type-thought_leadership","status-publish","has-post-thumbnail","hentry","thought_leadership_cat-financial-planning","thought_leadership_cat-financial-psychology"],"acf":{"left_sidebar_ads":false,"right_sidebar_ads":false},"yoast_head":"\nEstate Planning Studies Show 3 Blind Spots Advisors Can Help With<\/title>\n<meta name=\"description\" content=\"An overwhelming majority of clients (93 percent) want estate planning advice from advisors, yet only 22 percent are getting it. 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