According to a recent study, 55 percent of Americans have no estate plan -- and, according to another survey by PNC Financial Services Group, 37 percent of affluent Americans have not drafted a plan, either. Given the current tax system, many active estate planning advisors favor prospects who have large estates. In 2007 and 2008, only those consumers with estates worth $2 million or more -- $4 million for couples -- are subject to an estate tax, leaving their beneficiaries with a potentially costly bill. And it's those clients who are most concerned with the planning that's necessary to avoid these taxes.
"The market's gotten smaller if you're planning for estate tax purposes," said Bruce Udell, president and founder of the wealth management firm Udell Associates. "It works best with large estates and, frankly, there are very few of them."
But tax issues aside, estate planning is not just for the wealthy. Because the majority of Americans -- even those with meager assets -- lack a complete estate plan, the market is wide open for agents who are looking to play more of an advisory role when serving their clients.
"Estate planning is not estate tax planning; those are two separate issues," Udell said. "People with smaller estates should definitely (have an estate plan)."
According to a 2006 Agent Media* study, 25 percent of licensed insurance agents derive the majority of their income from life insurance sales, but how many of those agents are involved in estate planning, as well? And how many more are interested in but hesitant to enter this complex market? Let's first take a look at how the estate planning industry has evolved over the years -- and how you can get involved.
Then and now
When the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was passed, the estate tax exemption began gradually increasing from $1 million in 2001, to $3.5 million in 2009. In 2010, the estate tax wil be replaced by a much broader capital gains tax imposed on inherited assets. In 2010, under EGTRRA, the capital gains tax will be replaced by the estate tax; however, the estate tax exemption will then revert to its pre-2001 levels. After the recent change of control in Congress, most planners recognized that the chance of a major reduction in the estate tax is gone, and they are focused on planning for a substantial estate tax with their clients once again.
"Since (EGTRRA), up until the recent change of control in Congress, there was still great hope there would be an elimination of the estate tax some time in the foreseeable future," said Janice Forgays, vice president of advanced markets at Sun Life.
"That hope is somewhat dimming at this point."
But no matter the outcome, consumers should seriously explore the estate planning option -- even those with smaller estates.
Bernard Krooks, founding partner of the law firm Littman Krooks LLP, said he's already seen a shift in the types of clients who are interested in planning their estates.
"What we've seen is that people are focused from an estate planning perspective on non-tax issues," he said. "If your clients have an estate that is worth under $2 million if you're single or under $4 million if you're married, with some basic estate planning they can pass their assets to their heirs without paying an estate tax."
Krooks also explained that the current law has minimized the need for life insurance in some cases where the only purpose for coverage was to allow their heirs to pay estate taxes.
In fact, he continued, the current estate planning climate has opened the door for many agents to review their clients' life insurance policies. It now makes sense, he said, for those who purchased life insurance before EGTRRA to review their policies and potentially switch to another plan or purchase additional insurance.
Interested but hesitant
More so than some insurance markets, estate planning can be a tough one to enter. According to Gideon Rothschild, partner at Moses and Singer LLP, agents need to understand the income and estate tax implications of this market. They must understand all types of trusts and how they work. And they must understand how life insurance policies work in tandem with the planning procedure.
First and foremost, say many experts, you must align yourself with somebody who is well versed in the intricacies of estate planning, such as attorneys or other mentors.
"Don't try (estate planning) on your own," said Udell. "See if you can find a financial services firm. It's too small of a market and it's complicated, not only because of the tax issues, but also the emotional issues."
Education is essential to entering this field. A Certified Financial Planner designation can give agents an understanding of estate taxes and improve their credibility, as can the titles of Certified Life Underwriter and Chartered Financial Consultant.
"Pursuing designations shows not only the agent's knowledge level, but also the commitment of that producer in this more sophisticated marketplace," said Forgays.
Once you've gained the education necessary to enter this market, consider aligning yourself with a good estate planning attorney or other specialist. The American College of Trusts and Estate Counsel (www.actec.org), which comprises estate tax specialists, is one of the more well-known you can search for members on its Web site using a number of criteria. Another avenue is the National Association of Estate Planners and Councils (www.naepc.org), which has local chapters that you can join or mine for networking opportunities.
Despite the changing estate planning landscape, there are still many considerations that consumers and agents must take into account when putting together a plan for the future. There are basic items clients should have in place when crafting a plan. There are potential mistakes to avoid. There are prospecting issues, and there are a plethora of trusts to understand. On the pages that follow, a complete Guide to Estate Planning will take you through every aspect of estate planning -- no matter your client's financial situation.
As Forgays puts it, "Estate planning is not just for the payment of an estate tax. You also need to make sure your client's assets go where they want them to go, whether it's creating a legacy for something important before they die or making sure the family is taken care of, and all of that is good for estate planning. The marketplace is wide open."
For more information, please email ASJeditor@AgentMediaCorp.com or call 800-933 9449.
*Agent Media is publisher of the Agent's Sales Journal.
