How do we measure success in Family Wealth planning (my preferred term to that of “estate planning”)? I believe the measure of success is meeting client goals in a practical, understandable and cost efficient way. This is a human process – involving first, people and their aspirations, opinions and goals. Then, given the financial aspects of planning, we consider property, its characterization, title, income stream, and appreciation potential. Finally, the goals of most families include passing on the property to younger generation family members – and here we come face to face with taxation in its various forms. The process involved in meeting family goals requires advisor competency, communication and real concern for our clients.
For nearly 50 years I have been involved in the use of entities, often pass‐through entities, for the efficient planning of clients’ estates – during lifetime and after death. The properly formed, funded and operated entity can separate management and equity ownership, can develop a format for gift and other transfers of equity interests within a family, and often constitutes an integral part of the overall succession plan for the family.
The year 2010 was a real challenge for planners and their clients, given the 1‐year repeal of the Federal estate and GST tax (not the gift tax, however). Then, late in December, 2010, the Tax Relief Act of 2010 was enacted into law in a rush to prevent the repeal of the 2001 “Bush tax changes” effective January 1, 2011. Now we are into the second year of the 2‐year “planning mandate window” for review, update and improvement of clients’ estate plans.
Planning now, even with the 2010 new legislation in effect, seems required, at least for our clients with larger estates. The review of Wills and trusts with formula bypass and marital trust clauses is needed, at a minimum. Further, given the uncertainty here, clients should review and confirm their intentions for estate distribution at death – to make certain their wishes are carried out.
We have something of a “triple reason” for planning now – low asset values in this recessionary economy, low interest rates (example: the mid‐term AFR rate for October, 2011 – over 3 and to and including 9 year loans or sales within the family – is 1.19%), and yet valuation discounts may be in for adverse legislation soon!