Vanilla
The top 4 estate planning questions advisors have about UHNW clients
Ultra-high net worth (UHNW) individuals’ estates are inherently complex and far-reaching, so having a comprehensive estate plan is vital to ensure a smooth transfer of wealth between generations and avoid expensive legal battles at death. But that doesn’t guarantee that these UHNW individuals are any more educated on estate planning processes and pitfalls.
Even though 64% of wealthy individuals place a high value on the legacy they can pass on to the next generation, a full 39% do not have a comprehensive estate plan, according to the U.S. Trust Insights on Wealth and Worth. As their trusted financial advisor with a big picture view of their finances, you’re in a perfect position to help shore up those weak estate preparations.
Financial advisors have a critical role to play in coordinating and educating their clients about estate planning now to protect their assets in the future. Here are the answers to some of the biggest questions financial advisors have about how to plan the estates of their UHNW clients.
Do I need to be an estate planning expert in order to help my clients?
As a financial advisor, your role isn’t to know how to execute every part of a comprehensive estate plan. It is to know how to connect your client to the correct people who can handle each specialized task while keeping an eye on the big picture.
Steve Lockshin, the founder of Vanilla, described a contemporary financial advisor’s role as being a general contractor. He says, like a good contractor, you need to be “hiring the right plumber and the right builder and the right roofer to build the proper house, as opposed to knowing how to do all those things. The general contractor is not an expert at everything—they’re a very good generalist.”
‘A contemporary financial advisor’s role [is like] being a general contractor.’
Estate planning has traditionally and primarily been executed by lawyers. While lawyers are essential for drawing up documents and advising on specific legal matters, financial advisors have more visibility into the total picture and are uniquely positioned to help their clients be proactive about their estate planning. Especially for UHNW clients with complex estates, your intimate understanding of their assets makes you key to executing a comprehensive estate plan that successfully supports your clients’ long-term goals.
As a financial advisor, you can find and retain high-quality, specialized attorneys to assist with your client’s estate documents and legal specifics. In addition to needing to retain lawyers, those with a large number of assets will often end up with multiple professionals working on different aspects of their financial landscape—tax, business management, real estate, legal, and others.
In order to execute an effective estate plan, it is important that each of the advisors managing those assets work as a team to support your client’s long-term goals. As the advisor managing the estate, you are the one who has the full picture in mind, so you can play an important role in keeping each of these professionals coordinated and on the same page.
If you want to learn how Vanilla can help you deliver a standardized estate planning process for your ultra-wealthy clients, with no expertise required—get in touch.
How do I differentiate my value as a financial advisor to UHNW clients?
You can show the impact of your services on the estates of ultra-wealthy clients by demonstrating the value of “what you earn” vs. ”what you keep” financial planning. There is one sure way to get your client a 40% instant return without any portfolio risk—effective estate planning. Avoiding a staggering 40% estate tax, which doubles as it moves to the generation after, provides a clear benefit for UHNW clients who will easily surpass the estate and gift tax exemptions.
This strategy underlines the idea that it’s not what you earn; it’s what you keep, and the money you have on hand currently is worth far more than a hypothetical future return on a risky investment. You can be the key to making sure your UHNW clients keep the wealth they have built.
Thanks to Vanilla, it’s never been easier to do this. Show the true impact of your client’s estate planning and build deeper relationships with your UHNW clients by delivering the ultimate client deliverable—download a sample Ultra report below.
You can tailor your approach to the net worth of your clients. As they begin to reach the “ultra-high net worth” category—$30 million in assets—you will want to plan to use their lifetime exemption. For those with assets between $30 million and $100 million, you will want to consider using techniques to “freeze” assets within the estate. For clients with over $100 million, effective estate planning will be a full-time focus.
Forty-nine percent of the wealthy rank leaving an inheritance to their descendants as an important goal for their wealth, and a full 90% say the same of providing financial security for their family. You can help them support their heirs by disinheriting the IRS.
How do I retain the next generation as clients?
The best way to retain the next generation as clients is to ensure you form a relationship with them before they inherit. There are multiple ways you can develop that rapport.
Especially if heirs are adults with their own financial advisors when they inherit, they are unlikely to keep their new assets with you if you are a complete stranger. Something as simple as helping your client with regular family financial updates and “branding yourself” by keeping your name front and center on paper or digital communications can help build that relationship.
You can also become a trusted resource by including them in the estate planning process in more meaningful ways. This could be going over end-of-life and medical power of attorney plans with the family, so they all know what to expect, or helping your client explain the division of assets in their will and the intent behind it. Fifty percent of people have not had discussions on how to manage wealth with their children, so it’s not surprising that only 34% have confidence their children will use their inheritance well. However emotionally challenging they might be, these conversations are important to have.
You can also help future inheritors build their financial education by including them in the financial and estate planning process with their parents. This establishes you as a valuable source of financial advisement, and when they do inherit, they will be educated and prepared.
How do I help my clients understand the importance of planning for estate taxes?
Help your clients understand the impact of their planning by directly illustrating for them the impact that taxes would have on their current estate plan. Visual tools like Vanilla will help provide an overview of the impact taxes will have on their current estate plan in a more immediate and understandable way. If you need to scare them into proper planning, there’s always a good estate planning horror story to fall back on.
Help your client by explaining changes in tax law and their potential impact. Tax law changes dramatically with changes in administrations, especially for those in the top tax bracket, and those changes can have a big impact—especially if documents are out-of-date. If tax law has changed since the last time documents were updated, heirs could end up stuck in probate or losing a substantial chunk of their inheritance to the government. Capital gains tax, estate tax, inheritance tax, etc., will all have impacts on how much of the estate is retained and what strategies for avoiding tax impacts are ideal, so proper preparation is key.
You can educate your client on estate strategies, such as charitable giving and trusts. Your client should protect the wealth they have built by planning for estate taxes now and taking control over how their wealth is allocated by adopting strategies like charitable giving in their will. Trusts can be set up now to lower tax liability and avoid the delay of probate later.
Involve inheritors in this planning process as part of the family’s education. Walk through the potential outcomes under current tax law with your client to give them a deeper understanding of the impact of estate planning (or lack thereof) on the generational transfer of wealth.
Ultra-high net worth or not, your clients benefit from your careful planning
Managing the assets of UHNW clients comes with equally large challenges and opportunities. When you support these clients in creating an effective estate plan, the impact will be felt for generations. But even if the complexity of the estate is higher, your core role is the same no matter how large or small your client’s fortune is.
You are at your most effective when you are focused on the long-term financial health and happiness of your client and their family. By serving this need with effective estate planning, you make yourself invaluable and help to ensure that the fortunes you have carefully tended continue to care for your clients’ families long into the future.
Ready to build deeper relationships with your UHNW clients? Get in touch.
Show your ultra-wealthy clients you care about more than their money
This article is for educational purposes only and should not be considered legal advice. If you feel that the information in this article is pertinent to your situation, you may wish to consult a qualified attorney for advice tailored to your circumstances.
Published: Aug 13, 2021
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