What Producers Need To Do If The Estate Tax Is Repealed
Second of Two Parts
In my view, estate-tax-dependent producers need to visit with and emulate their colleagues who already have a more eclectic approach to the marketplace, a more comprehensive approach to serving their clients and a more diverse set of skills.
While its probably na?ve to think that even these more compleat producers wont be hurt by repeal, we should remind ourselves that the government would only be repealing the death tax, not death itself. So, the more compleat producers can be (somewhat) comforted in knowing that they can continue to do what they have always done, except now, the estate tax liquidity need will no longer suck all the oxygen (and premium dollars) from the discussion.
Business owners will continue to have the usual business succession challenges, including ownership succession and equalization issues historically best addressed by insurance.
They still will have their own financial planning issues, particularly as these affect their ability to phase out of the business on their own terms and not on a gurney. That means insurance-funded plans–qualified and nonqualified–as well as insurance for accumulation outside of the business.
There are also issues with regard to spousal financial security, particularly where the spouse wants to be secure independent of the business once the owner passes away.
There are management succession issues, meaning there are key person retention plans such as deferred compensation, executive bonus plans and a host of other things that can make sense.
Again, the compleat producers have long had a sales approach and a planning process that addressed all of these concerns. The estate-tax-dependent master of the split-dollar universe did not.
What about the impact of repeal outside of the business-owner market, meaning generally outside of a market in which a familys major holding is threatened by estate tax? Even in that context, a lot of sales tracks to upwardly mobile executives, for example, have been based on a need for estate tax liquidity. What if that need disappears?
In my view, the producers who will win, meaning those who will sell a lot of product, are going to be those who offer a dynamic planning process, one that creates a thread that the planner weaves through the patchwork quilt of the clients financial life.
The planning process must enable the client to maximize current and future income through coordinated tax, investment, risk management, retirement and estate-planning strategies. Said another way, the future belongs to the planner who knows how to make the clients dollar do double or triple duty.
In training seminars for producers who are prospecting among upwardly mobile executives, I have seen how heavily they dwell on estate tax liquidity as a key disturbing track. My message, however, has been for producers to downplay estate taxes as part of their sales process. Why? This type of client just doesnt care about estate taxes. They are far more worried about long lives at lower yields than they are about estate taxes. As long as their spouses will be protected, the kids will get what they get.
I try to teach producers that the better approach, for sake of discussion, is to get this type of client to appreciate that the insurance purchased for family security today can be the insurance that will enhance his or her own financial security in the future.