Failure to review, reassess and adjust planning to reflect current economic realities may serve to multiply financial hardships many times over and for years to come. Changes in asset values and interest rates resulting from the economic downturn may present a perfect opportunity to meet with clients to review the status of their planning in light of the changed circumstances. It may also afford a chance to review the client’s current life insurance program. With your help, clients may take the right steps to keep on course both in their short and long term planning.
Step 1: Will Review
Chances are the value of specific assets bequeathed to the client’s beneficiaries has decreased. Clients may need to review and rebalance their wills based upon new asset values.
Step 2: Trust Review
Like the assets passing by will, the value of assets held in trust has most likely diminished. Depending upon the terms of the trust, this could have negative and unintended results. Trusts need to be reviewed to help ensure that the purpose of the trust will be realized and that the client’s family remains protected.
Step 3: Estate Planning
Given the uncertainty surrounding the estate tax rate and exemption amount–will tax rates and the exemption equivalent go up or down or freeze in 2009 at a $3.5 million exemption equivalent with a top tax rate of 45%?–attention to other reasons for estate planning is important. Comprehensive estate planning goes far beyond tax planning. It ensures the right assets are transferred, when desired, and to the correct recipient. Proper estate planning provides for family needs and allows benevolent goals to be readily met.
Step 4: Gift Planning
Existing gifting programs should be reviewed for adequacy and value of assets to gift. Current gifting plans may have to be deferred due to general asset devaluation. Consideration may be given to long term gift planning using life insurance for the benefit of family and favorite charities. Alternatively, gifts of assets may be advantageous now because of the generally lower asset values for gift tax purposes.
Step 5: Charitable Giving
Clients need to determine whether and to what extent they will continue to make outright gifts to charities. Consideration should be given to making deferred gifts under the client’s will, which may be amended over time based on changing circumstances. Or the client may consider income-producing charitable gifting strategies like charitable gift annuities or charitable remainder trusts.
Step 6: Sales to IDGTs