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Life Health > Life Insurance

Financial planning: 5 things to expect in 2013

By Warren S. Hersch

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Death and taxes are two reoccurring certainties, but financial planners can also look forward to hiring sprees among small business owners, a spike in charitable giving and greater demand for high-end advisory services.

1. Death and (more) taxes.

Congress and President Obama are likely to settle on a permanent estate tax in 2013 because of the need to bring the burgeoning budget deficit under control. The increased certainty surrounding the estate tax will boost demand for a range of tax-driven wealth transfer planning vehicles. Among them: irrevocable life insurance trusts, grantor trusts, special needs trusts, testamentary trusts and revocable living trusts.

2. Time to hire.

Flush with cash, more small businesses than in past years will establish non-qualified executive compensation plans to recruit, reward and retain top talent. These include life-insurance-funded IRC Section 162 bonus arrangements (both standard and restrictive endorsement plans), split-dollar plans, supplemental executive retirement plans (SERPs) and IRC 409-compliant deferred compensation plans.

3. Exit strategizing.

A recovering economy will also prompt more small business owners to develop exit or succession plans, though some will gain more attraction than others. Particularly popular will be employee stock ownership plans (ESOPs). Among other benefits, these plans afford owners special tax advantages and the ability to retain control over the business during a phase-out period.

4. Give it away.

To the extent that affluent individuals have more money to give away, interest in planned lifetime gifts will also rise — to a point. Congress, I expect, will scale back the lifetime exclusion amount for charitable gifts, thus limiting the tax-incentives to engage in philanthropy. A less generous exclusion amount will act as a brake on such lifetime gifting techniques as charitable remainder trusts and charitable lead trusts.

5. On to greener pastures.

As interest in a range of wealth transfer techniques rises, demand for high-end advisory services will also increase. The changing market will prompt more advisors to move up the chain into the advanced markets space. And many of them will forgo commissions as part of their compensation to be more in tune with the greater level of expertise, professionalism and standard of care that affluent clients will expect.

For a complete look at what the next 12 months have in store for the life and health industry, visit LifeHealthPro’s 2013 Outlook page.

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