The income and wealth inequality political movement has been growing for quite some time, coming to a head in this year’s presidential race. Whether you agree inequality is bad or good is beside the point. The issue I’d like to address here is how it affects your clients, and therefore your practice. Specifically, we’ll review together how the given political climate heightens our clients’ desire for privacy, security and even social awareness of and responsibility for intergenerational transfer of wealth.
I grew up in Indianapolis, a conservative Midwestern city where it was difficult to determine whether a given individual was upper middle class or possessed vast wealth. I’ve since lived and practiced estate planning law on the Florida gulf coast where those same Midwestern attitudes and values prevail, largely because many of our residents are originally from that area of the country. To them, privacy is everything.
My father was an accountant. A client of his, “Lou” owned bowling alleys, a largely cash business. Lou had accumulated vast wealth. His daily dress code, however, consisted of white T-shirt under bib-overalls with a huge ring of keys attached to his belt loop. At first glance, you’d think Lou was a janitor rather than the millionaire next door.
Privacy is what Lou and many like him value above all else. It goes without saying that no professional should brag about who his clients are or how much wealth they earn or possess. It’s against our Code of Ethics for one thing and can jeopardize our license if violated.
Beyond that, revocable trust planning makes sense now than ever. Wills, as we all know, become public documents on the death of the testator available for anyone to view in a probate court. State laws vary as to the availability of the probate inventory, but it’s relatively easy to skirt those rules by filing a claim against the decedent. Until it’s objected to, the claimant may have access to all sorts of private information as an “interested party.” When you inform your high-net-worth clients how public a process probate is, they’ll generally value avoiding the public eye.
Trusts, in contrast, as we all know, are private. The terms of the trust aren’t published in a public court. Qualified beneficiaries are privy to the trust inventory while others aren’t. Too often, legal and tax professionals tout the probate avoidance or estate tax benefits of revocable trusts while failing to promote privacy, an attribute that’s likely to be as highly valued by our clients.
If you haven’t already installed encrypted email capabilities into your firm’s communication systems, now’s the time to do so. Practicing in the Fort Myers/Sanibel/Naples market, I represent several high profile clients, such as officers of Fortune 500 companies, television and movie personalities and political figures. Just this week, General Colin Powell’s emails criticizing Republican presidential candidate Donald Trump were hacked and made public. This was a nightmare for him. My clients are extremely sensitive to their personal information becoming public, as I’m sure yours are.
Not that you must encrypt every email, but by encrypting the emails that contain sensitive and private information and documents will engender comfort and confidence in your client base. By having encrypted email capabilities you not only demonstrate your ability to keep up with technological developments, but also, you show your clients a heightened level of diligence to keep their dealings secure and private.
Another opportunity the current political climate presents is to show your clients estate-planning vehicles they can use to promote whatever charitable or social causes are near and dear to them. Those who have accumulated wealth often feel a responsibility to give back to society, but don’t realize how the different vehicles provide lifetime income and tax benefits for themselves as well as testamentary tax benefits for their estates.
Moreover, I like to mention an old adage about wealth creation and preservation, “wealth that is aggregated and managed ultimately grows as opposed to wealth that is segregated and distributed which will eventually dissipate.” This speaks to not only the creation of private foundations, charitable lead and remainder trusts, but also to family limited partnerships with corresponding generation skipping transfer tax trust planning. How do you suppose that the Bush family has kept their Kennebunkport residence or the Kennedys have retained Hyannis Port property in the family for so many generations? While your clients may not have such famous properties, many do have vacation residences that multiple generations would like to retain and enjoy.
With the final treasury regulations limiting valuation discounts, which are expected to go into effect sometime after the first of 2017, this gives you the opportunity to promote your expertise to your clients. Even after the Internal Revenue Service restricts valuation discounts, the political climate places a premium on your wisdom and expertise. These vehicles have benefits beyond any tax breaks they offer.
You’re the expert. Take advantage of the opportunities.
Published September 16, 2016 on wealthmanagement.com