Why this advisor believes we are in a short-lived “golden age” for estate planning

Americans have lived through a “golden age” of estate planning, but it’s coming to an end, says a consultant for wealthy families and family offices.

That means financial advisors and other real estate planners must now seize the opportunity for their clients, says David Wells, founder of Nashville, Tennessee-based Family Capital Strategy. Wells said clients were recently able to transfer assets to their heirs without aggressive tax avoidance strategies.

During this unique period, the lifelong gift and estate tax exemption was $ 11.7 million for individuals and $ 23.4 million for couples, meaning estate planning was primarily a problem for the wealthy, says Wells.

However, as new tax policies are debated in Congress, including a possible withdrawal of those inheritance tax exemptions, tax-conscious estate planning could become more relevant to a large segment of the average consultant’s clientele, while family offices and consultants serving the extremely wealthy will have to change many of the assumptions, on that support the plans of their customers.

“The solution will usually result from the aggressive use of trust structures,” says Wells. “If a family chooses to use trust tools for future tools, it has a number of consequences.”

He says two more proposed amendments will encourage more families to use trusts and other structures to ease the tax bite. The first is a proposed increase in the capital income tax rate for high earners to better match their income tax bracket, meaning they will lose the advantage of receiving income from investments instead of a salary. The second is to eliminate an increase in the cost base of their wealth when they die.

Other possible changes, like removing or reducing valuation haircuts within an estate, will be important but have less of an impact, Wells says.

As a result, many families with their estate planners have rushed to change their plans over the past seven months, he says. These changes included the creation of trusts and strategies for extracting assets from the estates of the Grantor generations and taking advantage of today’s high tax exemptions.

According to Wells, a tremendous amount of assets are being transferred today while the fellow generation is still alive.

“If you speak to real estate planners, the past few quarters have been massive,” he says. “You got knocked down from work to answer the real wildcard question: will this stuff happen in 2021, and if so, is it retroactive all year? Or will it be passed sometime in the third quarter and come into effect in 2021? It’s a jump ball.

“I’m more of the opinion that something will be passed this year but will come into effect in 2022. This is the best time to do all of this type of work, but the question remains: how do we serve the needs and demands of the flow? Generation without burdening future generations with inheritances and legal structures that will ultimately have a detrimental effect on their own lives? “

Wells believes that many estate planning decisions are made too quickly without establishing a long-term family wealth framework to guide heirs’ decisions.

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