By: Brad Kelly, NBI Staff
Thursday, September 1, 2022
Is Estate Planning Practice Right For You? Here’s What You Need to Know
According to census information, nearly 64% of the US population is above the age of 35. Baby Boomers have long been the traditional consumers of estate planning services, but Millennials and Gen Xers are increasingly looking toward cementing their legacies as their families grow. With the percentage of older adults expected to increase from 56 million to 94 million between now and 2060, the potential market for estate planning attorneys is large and continues to grow.
What do Estate Planning Attorneys Do?
Estate planning attorneys serve as valued advisors to their clients and their families. From planning trusts and drafting wills to handling probate proceedings, estate planning lawyers pass their clients’ legacies onto ensuing generations and provide valuable services to several generations of the same family.
Handle the Probate Process from Start to Finish
Probate refers to a court process where all of the decedent’s assets are gathered together. Any individuals to whom the decedent owes money are paid out of the marshalled assets, and any tax liabilities are satisfied. Assets left over are then distributed to the estate’s beneficiaries. Having an estate plan in place can greatly simplify this process.
It is imperative that estate planning lawyers thoroughly understand this process. Depending on if the estate is testate or intestate, the process can vary greatly. It may be helpful to understand the Universal Probate Code since many states follow variations of it.
It is important to note that if a client owns real property in multiple states, probate must be conducted in each. It is also essential to understand the difference between probate and non-probate property. Probate CLE courses will give you the information you need to answer your clients’ questions.
Draft Living Wills, Living Trusts, Estate Plans and More
Estate plans typically consist of a series of documents that dispose of a client’s assets in a tax advantaged manner. They typically include a durable power of attorney, a method for naming guardians to raise minor children and handle their assets, and healthcare proxies that name an individual to make healthcare decisions on the client’s behalf. Estate plans also contain instructions for life insurance payouts, charitable giving plans, and business succession plans.
Wills are one of the most common documents trust and estate attorneys draft. Simply speaking, a will outlines a client's wishes regarding the distribution of their property after their passing. Wills often serve as the nerve center of any comprehensive estate plan. NBI offers several courses on drafting wills.
Living wills are documents many clients may ask you for. They are a type of advance directive. Simply speaking, a living will provides legal instructions regarding medical choices in the event a client is incapacitated.
One of the most common reasons clients want a trust is to avoid the probate process. Trusts are also useful alternatives to gifting assets to beneficiaries since they can shield assets from estate and gift taxes. Trusts can also be used to ensure financially irresponsible beneficiaries do not waste funds all at once. They can provide stipulations on how money is to be paid out.
Living trusts are documents that function much like living wills. They provide information on how assets should be handled in case of medical emergency, incapacitation, or other similar situations. As a trust lawyer, you should be familiar with the myriad forms of trusts. It is helpful to get educated on trust structures since things often change.
Stay on Top of Tax Issues
Much of estate planning revolves around disseminating a client’s access in a tax advantageous manner. An asset’s value is typically readjusted to reflect fair market value at the time of the decedent’s passing. This is referred to as a “step-up in basis”. This stepping up in basis minimizes a beneficiary’s capital gains tax. Understanding how this works is imperative for estate planning attorneys.
Estate planning attorneys need to be aware of both the federal and state tax codes. Due to the Tax Cuts and Jobs Act (TCJA) of 2017, federal estate tax exclusions remain high at over $11,000,000. 66% of estate planning practitioners say this doesn’t apply to them since the exclusion amount remains so high. This provision of the TCJA is expected to sunset in 2026 however, and the federal estate tax exclusion will drop to its previous $5,000,000 level. It is imperative for estate planning attorneys to stay on top of changes to both federal and state tax codes.
The Pros and Cons of Becoming an Estate Planning Attorney
The expanding potential client base for estate planning services means steady work for estate planning attorneys for years to come. Even though there is a strong need for these services, estate planning and probate practice may not be right for everyone. Here are some pros and cons to consider:
Pros of Estate Planning Practice
Useful Additional Skillset
Estate planning services are useful skills to add to your existing practice since clients will invariably ask you about them. If they already have a relationship with you on existing business, real estate or other matters, they will trust you with other legal questions. Rather than referring them to another attorney, you might as well educate yourself on estate planning and handle these questions yourself.
Multiple Generations of the Same Family
Estate planning attorneys act as a trusted legal advisor to multiple generations of the same family, which ensures future generations are more likely to come to you when they are ready to plan their estate.
Effective Word of Mouth Advertising
You can build your estate planning practice through word-of-mouth advertising since satisfied clients are likely to recommend you to friends looking to set up their own estate plan.
Estate planning clients are generally satisfied with their attorneys since they provide a valuable service that saves their families money down the road. Estate planning is also a client-centered practice. Attorneys typically have direct contact with their clients.
Cons of Estate Planning Practice
Though estate planning attorneys provide clients with a valuable service and develop relationships with them, they are often called on when their clients are incapacitated or deceased in order to get their affairs in order. This can be difficult emotionally.
Though every estate is different, the documents each one requires are often similar. It can sometimes feel like you are doing the same thing over and over again.
The Need for Estate Planning Services is Expected to Grow
No matter if it is your primary practice or an additional skill to incorporate into your existing practice, the need for estate planning services is only expected to grow in the future. Net household wealth is expected to increase from $87 trillion today to $124 trillion by 2030. Of this wealth, nearly $24 trillion is expected to be transferred to ensuing generations over the next 15 years alone. Even with more attorneys offering estate planning services, there is plenty of wealth to go around.
Brad Kelly is NBI's Content Strategist, Writer and Editor. He provides attorneys with timely, relevant information that helps them advance their law practices. In his free time he enjoys hiking, cycling and renovating old houses.