High-Net-Worth Clients Maintain Status Quo Despite Estate Tax Repeal

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Instead of allaying peoples concerns over estate taxes, the recent debate over and approval of a 10-year repeal seems to have had the opposite effect, says Walter Zultowski. More people with a high net worth are interested in protecting their wealth now than before the debate over repeal became national news, he says.

The senior vice president of marketing and market research for Phoenix Life Insurance Company, Hartford, Conn., says the debate over the repeal has people who had never considered themselves “high-net-worth” taking steps to protect their wealth against a tax they now realize could very well affect them.

Under the recently passed tax bill, the estate tax is scheduled to gradually decrease until Jan. 1, 2010, when it is set to terminate. It returns as it exists today on Jan. 1, 2011.

“Many high-net-worth people were unaware of the benefits of estate planning until debate over repeal of the estate tax over the next 10 years ensued,” Zultowski says. “Because of the discussion, many more of them feel they need to be educated on the issue. Many indicated [in a survey] that they plan to consult an advisor.

“If my suspicion is correct, there is a group of people out there who are aware of [the estate tax] now, but dont know where to turn, or even if it applies to them. Its a chance for advisors to do some basic education relative to estate planning with their clients.”

Even people who already have an estate plan in place, for the most part, do not plan to make significant changes in light of the repeal, according to early results of the 2001 Phoenix Wealth Management Survey.

“This group is knowledgeable about the tax law changes, but they are not responding with dramatic changes in their estate plan,” Zultowski says. “In fact, fewer than 5% said they anticipate dropping life insurance, terminating one or more trusts, decreasing gifting to children and charities, or changing business succession plans in light of the new law.”

The reaction, or lack thereof, to the legislation doesnt surprise Richard C. Martin, Phoenixs vice president and head of advanced marketing.

“The high-net-worth client is a fairly sophisticated planner,” Martin says. “Theyre used to dealing with uncertainty in their lives.”

The survey results show “they want to be cautious before they do anything dramatically different from what they did in the past.

“They believe the tax will come back, they dont feel its going to disappear forever. If it does, there might be another tax in the future, and they still need to prepare for that,” Martin says.

Because of the perceived uncertainty involved, Phoenix has updated its estate planning kit to allow for heightened flexibility. It now allows advisors to customize client presentations that calculate the impact the law has on individual estates.

For example, advisors can customize a chart that locks in an exemption and tax rate they feel might become permanent, according to literature from Phoenix.

The program allows for variable projections because the newly passed federal law repeals the estate tax for only one year, 2010, then reinstates estate taxes in 2011, and it is widely believed the law will be changed again before 2010.

“The kit is a tool that enables an advisor to do a model of a clients estate and help them answer their question, Do I need this, ” Zultowski says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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