Gifts + Estate Planning

Effective Estate Planning Beyond Tax

BY Spectrum Wealth Management | May 23, 2022
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Let’s face it — most people will not owe estate tax in the current estate tax environment. With an estate tax-free amount of $12 million for individuals, less than two-tenths of one percent of Americans will owe estate tax. This brings estate planning for most people back to the most critical issues and often the most ignored: family dynamics. On the tax front, income tax issues, including cost basis step-up, have risen to the forefront of the tax planning spectrum. Nonetheless, some of the decisions are more complex than ever, partially because of the unknowns of what a person’s estate will be at the time of their death and what the law will be at that time.

Planning for the family’s transfer of their wealth, incapacity plans, and executing those plans can be a significant challenge for both clients and their trusted advisor(s). Clients look to their trusted advisors for guidance when it comes to defining and executing their estate plans for future generations. It is critical that a trustee or directed fiduciary understand each of these variables and how they align with one another. What’s even more difficult is that there is no clear, repeatable rule when developing an estate plan. Trusted advisors must rely on broad guiding principles to accomplish one’s most important family responsibilities. Careful planning and expertise are necessary to find the appropriate balance between a family’s financial needs during and after life. After all, each family member is unique and has unique life circumstances.

So, how can a trusted advisor craft an effective estate plan with so many moving parts?

Take time to understand the family dynamics. This topic during estate planning is often underexplored because it is more difficult than showing that an idea saves taxes. We must talk about the real essence of estate planning which has to do with your comfort level with the heirs. This can be both negative and positive. Unfortunately, people tend to use examples of fear of reckless spending by heirs “wasting” the inheritance and ways of controlling that, which is an important issue when it applies. But more often, people think their children “hung the moon,” which means the negative approach will not apply. It is better to discuss relationships with each other, heirs, and their relationship with money. If you experience positive responses, discuss those positives. If this raises negatives, explore the negatives. Wealthy, successful children may require as much or more planning than spendthrift children.

Facilitate an environment such that one can have open and honest dialogue.

To construct a solid estate plan, one must obtain information that goes far beyond what’s contained within a personal financial statement.  It is common for clients to neglect personal and relational issues in estate planning or to assume that these issues will take care of themselves. Yet, in reality, not addressing these family dynamics often leads to emotional stress, miscommunication, and ongoing family conflict. Often, advisors will take much information to craft an estate plan from one family member, and the other spouse or other family member remains predominately silent. It is important to build relationships with other key family members to help you ensure they participate when planning for the transfer of family wealth.

A successful estate plan occurs when a trusted advisor facilitates a comfortable conversation with family members so that topics rarely discussed come to the surface and are factored into the plan. By acting as a facilitator, the trusted advisor can clarify objectives, build an estate plan that accurately depicts one’s wishes, and prepares a family for when one’s time on earth expires. The result of an effective estate plan brings “peace of mind,” knowing that there is a clear plan in place, one that hopefully provides order for the family.

Here are some Common Estate Planning Questions to share prior to the meeting:

  1. What are your goals/wishes for your estate plan?
  2. What’s most important to you?
  3. Have you ever done any estate planning?
  4. What are your thoughts/plans for incapacity regarding you and other family members?
  5. What roles, if any, do you want family members to play regarding your estate?
  6. Do you have a healthcare directive and durable POA?
  7. How are all of your assets titled today, including insurance policies?
  8. Do you have specific current and future concerns about family members?
  9. Any special needs and/or family illnesses that should be considered?
  10. Are your parents still alive? And, if so, is there any wealth you most likely will inherit that should be considered?

Setting the tone of the meeting by defining the purpose of the meeting, how the meeting will work, and discovering the desired goals is critical to getting started. Additionally, establishing an agreement is an important step that lays the groundwork for a successful meeting. Conversations regarding death and money can be difficult. For all involved, confronting the notion of one another’s death can be uncomfortable. An excellent facilitator will approach the conversation confidently, talk about it freely, and make the conversation as comfortable as possible. After all, a successful estate plan considers both the emotional (EQ) and rational (IQ) sides of a family’s equation.

While meeting virtually has become a necessary way of life today, family estate planning has taken on even greater importance. As they say, “the show must go on,” and the same meeting guiding principles mentioned above apply virtually. Responding effectively to external challenges can also help ease tensions heightened by the stress of the pandemic. Whether meeting in person or virtually, the tips and suggestions above can aid in gaining insights and information, discussing important financial matters, and making what is generally uncomfortable conversations more comfortable. Remember, the goal for developing and implementing a successful estate plan is obtaining open, honest, and agreed-upon during and after life family wishes and desires.


Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security. 

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