Estate planning, wills and who gets what after a benefactor passes away often figure highly in advisory talks. But taxes should also concern advisors when it comes to passing on wealth.

For instance, the new federal estate and gift tax lifetime exemption of $11.4 million per person ($22.8 million per married couple) has made federal estate tax a low priority for many. “One needs to be mindful of state estate taxes as well,” said Dean Mioli, director of investment planning for Independent Advisor Solutions by SEI in Oaks, Pa.

The Trump administration’s tax reform also makes gains during the original owner’s lifetime tax-free for heirs. Under the reform package, the cost basis for inherited investments is the value at the owner’s death, also called the step-up basis.

Coupled with the higher federal estate tax exemption under the new law—which will sunset in 2026, if not sooner—owners of estates that exceed the new exemption amounts should gift assets during their lifetimes to use the higher exemptions. Also under reform, giving cash or other assets that have little or no built-in gains is the most efficient way to gift during a lifetime.

In multigenerational planning, Summit Wealth Advocates in Prior Lake, Minn., segments clients based on age and financial situation. “When we approach our wealthy, older clients—say, those in their 80s—we discuss strategies like gifting RMDs directly to charity or gifting appreciated securities to grandchildren to be used for college,” said Summit Wealth President Bruce Primeau.

Retirement, marriage, divorce and new births in a family should motivate high-net-worth clients to have these sometimes-tough conversations, advisors said. “While you want to leverage these events to initiate a discussion, you must also be mindful that these events typically create a busier and sometimes stressful period for the clients,” said Angela Coleman, an advisor at Unified Trust Company in Lexington, Ky.

“The life changes we typically see with our aging clients are health issues, where they come to the realization that they just aren’t comfortable making complex financial decisions any longer,” Primeau said. “This involves the transition of financial and perhaps health decisions to a client’s children, which can be sensitive.”

Advisors should recognize how heirs are themselves maturing and understanding more about lifelong finances, she said. “Initially, a professional advisor should communicate the importance of engaging family in the planning process and revisit this notion as family members mature,” Coleman said. “As the lives of the client’s children start to take shape in terms of marriages, families and careers, suggest an inclusive meeting where they can become familiar with the client’s ultimate goals.”

There are usually more advantages than pitfalls for wealthy clients planning ahead with their heirs—and the advisor rather than the tax expert can take the lead in such talks, Mioli said. “The financial quarterback should coordinate with other professionals, such as the CPA and estate planning attorney,” he added.

"High-net-worth clients know their situations are more complex and they understand that planning is the way to ensure matters are handled properly,” Coleman said. “They’re often uncomfortable with involving family members in those discussions. A good CPA helps their client understand the value of early discussions.”

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