At the end of 2016, Trusts & Estates conducted a survey to gauge how they’ve been affected by some of the tax law changes already in effect, as well as how they expect to be affected by some of the anticipated changes to the field (for example, due to the presidential election and proposed regulations). Over 700 estate planning professionals, consisting of attorneys, financial advisors and CPAs responded to our survey. Here are some of the highlights of their responses.
Estate Planning Business
Changes in the tax law are well known to have a direct effect on the estate planning business. For example, an overwhelming majority of respondents, both those that are relatively new to the field and those who’ve been in the practice for over 20 years, said that portability has changed the way they draft wills. Likewise, because the estate tax exemption has been raised, 62 percent have been doing more income tax planning, though 48 percent reported that their practice size has largely remained the same since the change.
Level of Optimism
Perhaps the above-mentioned statistics explain why, despite the uncertainty of the year ahead (largely due to the unpredictability that comes with President-elect Donald J. Trump taking office), 78 percent of those surveyed are more optimistic now as opposed to last year regarding the future of their practice. Though developments in tax law affect how advisors practice, it doesn’t necessarily affect the scale of their business. This hypothesis is further bolstered by the fact that 80 percent believe that Trump is likely to make changes to the current estate tax laws—yet 56 percent of respondents aren’t sure whether the anticipated estate tax repeal will help or hurt their business. One may assume that a potential estate tax repeal will result in a lot less need for estate planning (44 percent of respondents felt that minimizing estate taxes was a pressing concern for clients); however, it may very well just shift the focus to other estate planning needs.
International Reporting Standards
Another interesting revelation was that, of those clients who own assets abroad, nearly 78 percent aren’t concerned about recently implemented international reporting standards, such as the Foreign Account Tax Compliance Act and the Common Reporting Standard. Needless to say, these regulations still need to be acted on and require attention from advisors, as penalties for clients who don’t comply can be rather steep (business will be particularly booming in this area if those who promised to leave the country when Trump was elected keep their word). Advisors may also choose to focus more on needs such as family office succession planning and preemptive planning to avoid chaos or discord among family members.
Opportunities Exist
Despite a transformational year, one that snapped the industry to attention, and with more change certain as we start 2017, fear not. The rich are still getting richer, with approximately 58 percent of respondents reporting that the net worth of their average client is higher than it was two years ago. This means there’s an ample amount of clients who will need estate planning services, and the advisors who are able to most efficiently adjust their practices to accommodate change in the industry will prevail. It’s also worth mentioning that the average age of our respondents is 54.5, confirming the dichotomy that both a threat to and opportunity in the industry exists. Though politicians and activists have cast a somewhat ugly shadow over the industry in recent years, opportunity is abundant for those interested in giving it a go (and hopefully cleaning up its image). Stay tuned.