1. Identify and prioritize goals.
“Just like with any other type of planning, I believe in goal-based planning,” Hopkins said. “I don’t believe that in any shape or form, you can create a good plan or process without knowing what you want the end to be.” Goals will often change, just like with any process or journey, but you have to start somewhere and there is no better place to start than with identifying and prioritizing goals, he explained.
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2. Involve the family.
“The reality is estate planning typically involves family,” even if not in every situation, he said. Therefore, he likes to involve the family “extremely early” in the process or at least have a discussion very early on about where family members fit into the estate plan’s goals, he noted.
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3. Do a financial assessment.
It’s “always important” to do a financial assessment to understand a client’s financial situation, because that will “limit what we can do or open up doors for things that might be possible,” he said.
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4. Review housing and care alternatives.
It’s also important to discuss where the client wants to live and what care alternatives there are towards the end of their life, he said. Although a realistic discussion of long-term care and end-of-life plans, including housing and care alternatives, is part of retirement planning, it is also part of estate planning because “most people end up dying in an institutional setting” and that stands to affect the estate plan, he explained.
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5. Review the client’s current plan.
Even if a client does not have a written plan, they still have some sort of plan involving their estate, even if it is just to use a state’s succession laws, so it is important to go over that plan.
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6. Establish advance directives.
Along with housing and care alternatives, end-of-life planning also requires establishing what the client’s wishes are regarding medical care. Advance directives typically include setting up a living will to make sure the client’s wishes are carried out.
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7. Implement the plan, communicate it to the people who need to know about it and distribute documents to those people.
After implementing the plan, it is important to communicate details of it to the “right people” and distribute documents to those people, who include advisors, attorneys, family members, business partners and others, he said.
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8. Update and review the plan as changes occur, keeping clients informed of potential changes.
“Understand the value of looking at lifetime transfers, especially if tax rates start going up and we see capital gains rates [change], removal in step-up” and other significant changes happen that stand to impact the client, he advised.
If Congress passes one of the key Biden proposals by the end of this year to go into effect in 2022, “it does open up opportunities when we start looking at the [tax] rates and where they fall,” he said. Advisors should, at this point, consider whether it makes sense for some clients to do Roth conversions this year “to stay in a lower rate than possibly ... higher rates in the future,” he noted. It may also make sense to implement charitable giving and income shifting or deferral strategies, he said.
If the rate on long-term capital gains for households making more than $1 million annually increases from 20% to 39.6%, it may make sense to shift when the taxes are paid, he added.
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9. Do not change course too early.
It is important to remember that until any of the proposed legislation passes and becomes law, “they’re proposals” and “not in place yet,” he said. Even if the proposals become law, “most of your clients will not be impacted” by the proposed changes, he pointed out. One of Sen. Bernie Sanders’ proposals, for instance, concerns transferring a billion dollars, so “there is a huge gap between your clients and that impact,” he noted.
In the meantime, “keep doing Roth conversions” whenever they make sense and take advantage of charitable gift annuity and other strategies, he added.
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10. Keep the focus of alpha on the planning and help clients sleep better at night.
Staying on top of all the potential legislative changes will help clients sleep better at night. “Start thinking about potential planning strategies that you would like to bring up with your clients today because there is a lot of momentum here,” he said. Although it’s “not a certainty we’ll see any of these” proposed changes become a reality, “we’re likely to see a lot of them together if we do see something.”
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September 09, 2021 at 02:05 PM
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