The coronavirus pandemic has encouraged people with existing estate plans to consider reviewing and modifying them, and people without plans to develop them. Regardless of your client’s situation, there are worthwhile conversations about estate planning to be had.
As a CPA, you have a strong relationship with your clients and a comprehensive understanding of their finances. Because of this, you provide great value, and when partnered with an attorney, you form a solid team. You bring your expertise on the financial structure and they bring their knowledge of the legal system.
Three estate planning conversations you’ll want to have with your clients:
- Acting now is wise.
Take advantage of the temporarily doubled estate, gift and generation-skipping tax (GST) exemption — it’s currently $11.58 million and is slated to be cut in half January 1, 2026.
If your clients think they have plenty of time before 2026, inform them that the estate, gift and GST exemption may change before 2026 if legislation is passed, so they should make their plans sooner rather than later. Clients should also note that many states have a state estate tax with thresholds that are significantly lower than federal.
Another reason now is the perfect time for estate planning: historically low interest rates. If you do a wealth transfer strategy that’s tied to interest rates, you have a very low hurdle for the technique to work. Estate planning works best when you give something that’s going to appreciate significantly down the road.
- Proper documentation is key.
Inform your clients of the various documents — will; living will; medical power of attorney; financial power of attorney; revocable trust — that can go into an estate plan. Help your clients decide which of these documents they need and help them create a schedule for completion.
Many people have a will, but they may not have a living will that outlines what the individual wants in the event they are placed on life support. Or they may have a living will, but not a medical power of attorney, identifying someone to make medical decisions on their behalf. COVID-19 has made us particularly sensitive to the fact that we need healthcare documents in the estate planning “package.”
A revocable trust allows the individual’s personal assets (without a named beneficiary) to be legally transferred to a trust while they’re alive. There are two main reasons these trusts are appealing: 1) they provide privacy — assets that are part of a revocable trust are not part of the public estate record; and 2) your client will likely save money because assets owned by a revocable trust are not part of probate.
- Seeing is believing.
A profound way to communicate an estate plan is with a visual diagram. It’s less theoretical and more digestible.
Develop a flow chart with asset values so your client can see how their assets will be distributed, and don’t be surprised if your client has an “aha!” moment while looking at the plans. Work with your client to modify the plans so they fully align with what they envision.
Also, reinforce that these plans aren’t set in stone and can be changed later if need be.
Regardless of where you are in terms of your knowledge of estate planning, the AICPA is here to help.
- The Personal Financial Planning (PFP) Section team created a podcast regarding important estate planning considerations, and a webcast recording and slides about estate planning amid COVID-19.
- This year, the ENGAGE conference will be digital with sessions covering the spectrum — from estate planning fundamentals to advanced strategies.
- You’re also invited to participate in the Estate Planning Certificate Program.
Lisa Featherngill, CPA/PFS, Head of Legacy and Wealth Planning, Abbot Downing. Lisa leads a team of experienced and credentialed professionals who provide traditional planning in a unique way to align with family governance, history, and education programs that reflect clients’ values, priorities, and goals. She has provided tax and financial planning services to affluent clients and families for almost 30 years. She currently serves on the AICPA Personal Financial Planning Executive committee and the Advanced Estate Planning Conference committee.