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Retirement Planning > Retirement Investing

Estate & retirement planning together: constructive or conflictive?

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In the 1970s and 1980s, primary estate planning strategies focused on reducing Federal estate taxes and how to pay those taxes. In the decades since, Federal estate taxes have disappeared as an issue for more than 99 percent of clients, according to the Tax Policy Center, because estate values in 2016 must exceed $5.45 million (single) or $10.9 million (couple) for such taxes to apply. State death taxes may still be reduced by planning but they are, most times, an order of magnitude less than Federal taxes.

As estate tax planning declined in need, revocable living trusts and other protection strategies increased in importance, for probate avoidance, privacy and asset distribution control. Also, the need grew for advance directives, for health care decision-making and the transfer of financial decisions to be made when and if needed.

As useful and necessary as living trusts and advance directives are, how much professional income can this work generate, and how much can it grow, within most estate planning practices? In what direction does the estate planning attorney look today in order to continue to increase the value of their advice and service to clients? Many estate planning attorneys have increased their elder law advice and services, yet how much more practice development can this kind of advice and service offer to such attorneys?

Estate planning today

With little or no need for estate or death tax planning, most middle class and working people’s estate planning today involves wills, advance directives and living trusts. As a result, the attorney’s practice needs a prospecting machine to generate the clients needed to grow a practice into something more valuable, and to generate a respectable income. What else can the estate planning and elder law attorney do to serve their clients and deliver important and valuable services — and significantly grow their practice?

The answer can well be individual retirement planning. Attorneys who help with client retirement and financial decisions can potentially add substantial protection and flexibility to the retirement plan, benefitting the client. They might help many clients who do not yet have a retirement or income plan to live a more secure lifestyle. Some have argued that retirement planning might be more valuable than estate planning to clients. After all, if the retirement plan fails, won’t much or all of the estate plan fail, too?”

Retirement planning challenges reviewed

There are a handful of strategies available to estate planning attorneys who want to add retirement planning to their service. The attorney will need professional support and resources and we’ll review the primary options on the next page. However, let’s first look more closely at the major retirement planning challenges today and how those may be converging with retirement planning. 

Financial safety and asset protection. Should the attorney advise the client about the amount of investment and other failure risks in the client’s retirement plan? With estate planning as a protection-driven service, why not advise clients to increase their retirement asset and retirement income protection in order to reduce the risk of planning failure? How do you earn a little more return today without taking more risk? How should clients handle their “sequence-of-returns” for example?

Individual financial responsibility. So many clients retiring now or in the next few years have no traditional pension. That means the great majority of clients today are responsible for the financial management of their own retirement assets and income. What if the client is using an accumulation advisor and not a retirement planning advisor? Retirement asset accumulation and retirement income distribution are quite different professional activities and strategies. What gets you to retirement won’t get you through retirement.

Increasing longevity. Many retired clients are living long lives and many clients retiring now are likely to live more than 30 years in retirement. If the clients are a married couple, the probability that at least one lives into their 90’s now requires a new kind of planning. The estate plan needs flexibility to manage and adapt to the needs of this lengthy time horizon, and the retirement plan needs to last this long as well. Is it possible as clients age into a long retirement it becomes even more important to combine retirement planning and estate planning?

Government benefits. Should the estate planning attorney give clients advice on Social Security benefit claiming strategies? Should the attorney be aware of the rules of income taxation that impact Social Security benefit taxation? What about income taxation and Medicare costs and Medicare taxes? Should the retirement and estate plans have enough flexibility so that both can meet any later need for Medicaid or other benefit qualification?

Health care and long-term care planning. Should financial products be used in conjunction with powers of attorney and advance directives so that convalescent and health care needs have some combination of insurance and flexibility to meet future client needs?  What assets should be dedicated to planning for any long-term care needs of individual clients or couples? What changes to health care or long-term care funding and protection might be needed in the future?

Middle class and working clients. Many estate planning clients are middle class and working clients, those who need legal protection for their family members and themselves in the event of death, disability or other long-term impairment. These clients need wills and advance directives, and many use trusts for asset control and distribution.

For many clients today, their largest single asset class is qualified retirement and IRA funds. This money is not typically controlled or managed by the estate plan. Perhaps a trust is sometimes used in order to protect and to stretch the beneficiary distribution of qualified assets, but how often is this really done? How much attention should the estate planning attorney give to the clients’ qualified assets? Again, if the retirement plan fails, the estate plan won’t work financially or in legacy.

Retirement planning strategies for estate planning attorneys

Do-it-yourself strategy: The attorney can earn his or her insurance license and maybe a securities or investment advice license, too. This is the “hard way.” This is not a very efficient way to actually help clients now or in the near future, and you may not help them adequately enough.

Hire an employee strategy: The attorney can hire an employee to provide this service. That’s faster than do-it-yourself and it can offer the attorney great experience. It does require some investment of time/money and you really want to pick the right employee.

Professional referral strategy: The attorney can refer clients, perhaps those age 50 and above, to a retirement planning professional. This can be done immediately, assuming one has those referral relationships in place now. This delivers experience as well, but this does not increase control and revenue for the attorney. Service to clients comes first but professionals of all kinds need to get paid for the good they do for clients.

Working association strategy: The attorney can associate with a retirement and financial professional. The attorney delivers estate planning and the retirement pro does his or her work immediately after. Revenues from any product sales would be shared between the attorney and the retirement pro.

This strategy takes a bit of time in the beginning yet can generate new revenue fairly quickly. This working association requires the attorney to be life insurance licensed, at the least. That’s easier than the bar exam and it will be familiar material to many attorneys. This also gives the attorney an ongoing opportunity to develop his or her own retirement planning learning experience. Selecting the right associate is important, however.

Marketing strategies for estate planning attorneys

Attorneys who add retirement planning to their practice might look to the same resources and organizations that today serve insurance and other financial professionals when those people expand into retirement planning. Some of the national annuity marketing organizations might be the best resources. You need a firm that provides a wide range of training, advertising, and marketing services — those same services and products that help them serve retirement and financial professionals today.

The attorney will want a consult about his or her current marketing strategy. Should he or she create or enhance a website or social media presence? Many estate planning attorneys now offer client education seminars. Perhaps a new seminar would be much more attractive, compelling and motivational, one where both legal and retirement planning concepts were presented together? Of highest value perhaps, is that the marketing company can introduce the attorney to an experienced and compatible financial professional and can help develop an effective working association.

Many good retirement planning professionals today are looking for closer working associations with estate planning attorneys. Just as attorneys can better serve clients by incorporating retirement services, so too can financial professionals better serve their retirement planning clients by having more knowledge of estate planning principles and specific client estate plans. 

Primary practice benefits of retirement planning

The attorney will be rewarded in several ways to see that more clients receive planning services and greater retirement planning protections than they might otherwise. Clients better served are lives better lived. There should be fewer client planning mistakes, misunderstandings and conflicts occurring between a client’s financial advisor and legal advisor — because both are now on the same page with their common client, working together toward common goals. The client is better served and the estate plan is more likely to work properly.

The new revenue stream to the legal practice can be used to provide greater or better service to existing and new clients. This new revenue can also be used to fund law firm marketing and community efforts, increasing the number of legal clients and the other services delivered to the community. The attorney opens up an opportunity to differentiate him or herself in that their practice is broader in scope and reputation. That should enhance professional marketing and prospecting efforts and increase results. With additional firm revenues, the attorney can consider many more things for the development of their practice.

As you think about the business strategy of your legal practice, look over the horizon and evaluate your estate planning clients’ needs and what’s most valuable to them. You might see that adding retirement planning to your value proposition is a winning strategy for all. 

See also:

Questions persist around settling Prince’s estate

Calculating RMDs for IRA annuities: 2 scenarios

Using the qualified charitable distribution: 5 IRA scenarios

Changes to estate planning laws in 2016: what to expect


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