The landscape of trust and estate planning is shifting rapidly, influenced by economic changes, technological advancements, and evolving client priorities. Insights from Bank of America’s 2024 study and WealthCounsel’s report offer valuable perspectives on navigating these developments. Below, we delve into the trends shaping the industry and their implications for advisors, estate planning attorneys, and their clients.
Proactive Adjustments in Estate Planning
Economic factors such as fluctuating interest rates and the looming potential expiration of estate tax provisions in the 2017 Tax Cuts and Jobs Act are prompting high-net-worth individuals to reassess their estate plans. A decisive 86% of professionals surveyed in the Bank of America study recommend updates to estate plans, citing gifting strategies (53%) and irrevocable trusts (40%) as top solutions.
The potential reduction of the estate tax exemption by 2025 has created urgency among clients seeking to optimize their strategies. Proactive planning not only mitigates potential tax liabilities but also helps preserve wealth for future generations.
While the recent election results have reduced the immediate likelihood of the estate tax exemption sunsetting, many professionals and their clients remain proactive, recognizing the value of addressing potential changes in tax law through strategic estate planning. This approach reflects a preference for ensuring their legacies are safeguarded, regardless of the political climate.
Read More: Can an ILIT Help Your Clients Prepare for the 2025 Estate Tax Sunset?
Family Business Succession: A Key Focus
Family-owned businesses are integral to many estate plans, with 54% of business owners preferring to transfer ownership to the next generation rather than selling. This underscores the importance of succession planning in ensuring both business continuity and equitable estate distribution.
Trusts have emerged as a favored tool for managing these transitions. The Bank of America study reveals that 62% of clients use trusts to maintain family control, while 57% prioritize business continuity over dividing ownership. This strategic approach safeguards assets while fostering long-term stability for family enterprises.
Demographic and Behavioral Shifts
A survey conducted by caring.com reveals a surge in estate planning among younger Americans, with a 50% increase in those aged 18-34 creating wills since the pandemic. This trend is fueled by digital accessibility and increased financial awareness. However, misconceptions persist: 40% of Americans believe estate planning is only for the wealthy, a belief that discourages many from taking action. Low-income individuals are particularly affected, with estate planning rates dropping from 25% in 2020 to 21% in 2024.
Technological Integration in Estate Planning
The adoption of technology is reshaping estate planning, with tools like generative AI and digital platforms enhancing efficiency. The WealthCounsel report highlights that 63% of professionals use generative AI for document drafting, while 53% employ digital tools for client management. These advancements allow advisors to deliver personalized solutions with greater accuracy. However, concerns about data privacy and the reliability of AI outputs remain critical considerations. Clients increasingly value the transparency and accessibility technology brings to their estate plans, making its integration a competitive advantage for advisors.
Shifting Client Priorities
The motivations driving estate planning are evolving, with clients emphasizing the importance of safeguarding legacies and preventing family disputes. According to the Bank of America study, 51% of clients establish estate plans primarily to avoid family conflicts, while 43% include provisions for incapacity.
Transparent communication and appointing neutral professional trustees are vital strategies for achieving these objectives. By addressing potential challenges upfront, clients ensure their plans align with personal values and minimize the likelihood of future conflicts.
The Role of Jurisdictions and Corporate Trustees
Jurisdictions like South Dakota are gaining attention for their favorable tax laws, offering robust legal frameworks for asset protection. Additionally, the use of corporate trustees continues to rise. The Bank of America study notes that 38% of advisors recommend corporate fiduciaries for their impartiality and professional management, with another 54% doing so selectively based on client needs.
Corporate trustees, such as Life Insurance Trust Company (LITCO), bring expertise in managing complex estate structures, ensuring compliance, and facilitating seamless execution of clients’ wishes. These capabilities make them an invaluable partner in achieving long-term estate planning goals.
Looking Ahead
The 2024 trends in trust and estate planning underscore the need for adaptability and foresight. As economic and legislative landscapes continue to evolve, advisors, estate planning attorneys, and their clients must collaborate to craft strategies that safeguard wealth, protect family legacies, and align with personal values.
For those whose estate plan would benefit from an ILIT, Life Insurance Trust Company works to assist advisors, attorneys, and their clients in navigating these complexities with our corporate trustee services. Request a consultation to learn more about how you and your clients can benefit from selecting LITCO as trustee.
