A survey of professionals reaffirms the critical impact family dynamics have on estate planning
In a poll of over 100 attendees at the 53rd Annual Heckerling Institute on Estate Planning — which included attorneys, trust officers, accountants, charitable giving professionals, and wealth management professionals — the firm found nearly half (46%) identifying family conflict as the biggest threat to estate planning in 2019.
Looking at the various causes of family conflict during the estate-planning process, the designations of beneficiaries was identified by the most respondents (30%) as the most common source of friction. Other contributors were not communicating the plan with family members (25%) and working with blended families (21%).
“Family dynamics have always played a critical role in estate planning. As we start to see more blended families, we expect these conversations to become even more prevalent and challenging,” said Ray Radigan, head of Private Trust at TD Wealth. “Estate planning comes with the responsibility of motivating families to communicate through difficult times, which requires regular dialogue and complete transparency.”
With the return of market volatility last year, it has moved from being a background concern to a more significant consideration in estate planning. Nearly a quarter of respondents (24%) identified volatile markets as the biggest threat to estate planning in 2019, up from 12% in 2018.
“It's not surprising that more planning professionals are keeping a close eye on volatility this year because many clients view lifetime gifting as an important component to their estate plan,” Radigan said. “These gifts, however, should only be made if enough assets are retained to provide support during retirement years.”
With turbulence back in the limelight, clients may be understandably more hesitant when considering whether they should gift assets during their lifetime. But Radigan argued that clients should maintain a long-term view in investing, which would hold that “short-term market movements are no match for a robust estate plan and a well-balanced portfolio.”
Also weighing considerably on US estate planning are tax reforms south of the border. Given the recent increase in the federal gift and estate tax exemption, estate planners are exploring strategies that would let clients benefit accordingly. While 31% of respondents proposed that clients should consider trusts to protect their assets, 26% said they encouraged planning to minimize future capital-gains tax consequences. Meanwhile, 21% agreed that clients should gift now while the exemption is generous.
“Estate planners are now emphasizing the importance of creating trusts for the benefit of their loved ones so that assets can be protected from future claims,” Radigan said. “For example, rather than provide a child with an outright gift or bequest, many parents are creating trusts as a means of protecting assets from future divorce claims. Additionally, these trusts can be used to ultimately protect loved ones from themselves or other loved ones.”