By Jason Salinardi
Congress avoided the so-called fiscal cliff by passing- at the 11th hour- the American Taxpayer Relief Act of 2012 (the 2012 Tax Act), signed into law by the President on January 2, 2013. The 2012 Tax Act makes several important revisions to the tax code that will affect estate planning for the foreseeable future.
For most Americans, the 2012 Tax Act has removed the emphasis on estate tax planning and put it back on the real reasons we need to do estate planning: taking care of ourselves and our families the way we want. This includes:
- Protecting you, your family, and your assets in the event of incapacity;
- Ensuring your assets are distributed the way you want;
- Protecting your legacy from irresponsible spending, a child’s creditors, and from being part of a child’s divorce proceedings;
- Providing for a loved one with special needs without losing valuable government benefits; and
- Helping protect assets from creditors and frivolous lawsuits.
Typical estate planning offers transactions, numbers, techniques, information and advice, when clients are really looking for connection, purpose, vision, wisdom and trust.
This ‘traditional’ estate planning often results in:
- Plans that do not address what is truly important to you
- Plans that don’t provide adequate protection for your beneficiaries
- Plans that are not fully executed because they are not fully understood
- Plans that are out of date (and ultimately worthless) due to changes over time
- Very high risk to your loved ones of significant fees and expenses
The old wealth paradigm does a great job of passing assets and avoiding taxes, and an appalling job of preparing heirs to receive material inheritances. When the focus is money, heirs tend to equate their self-worth with their net-worth. It’s called ‘affluenza’, and its symptom is a dysfunctional relationship with wealth.
There’s a new focus on legacy planning based on values & vision. That focus puts the family at the center of the process by focusing on the three dimensions of family wealth:
- Financial (what you own)
- Human (who you are)
- Intellectual (what you know)
Estate planning is not something you do to your client, nor is it something you do for your client; it is something you do with your client.