Election creates an opportunity for advisor/client dialogue

The post-election period provides advisors to engage in a discussion with their clients on financial issues that are impacted by the election and issues that are not.

Andrew Rinn, associate vice president at Sammons Financial Group, discussed some tax and estate planning issues under a new administration during a webinar by the National Association of Insurance and Financial Advisors.

Some financial issues are election neutral, he said, meaning that they are less impacted by the results of an election. Examples of election-neutral issues include monetary policy, the federal debt and the stock market. Election-dependent issues that impact clients include estate and gift taxes, and general tax policies.

Clients may be concerned about how the election will impact the stock market, but Rinn said those fears may be unfounded. He looked back at the S&P 500 index since 1996 race between Bill Clinton and Bob Dole and found that the index has gone up steadily – from 746 in 1996 to 5,900 immediately after the Nov. 5 election.

“My point is this – the S&P has gone up regardless of who wins the election,” he said.

But what is foremost on clients’ minds is whether taxes will go up as the individual tax cuts in the Tax Cuts and Jobs Act of 2017 will expire at the end of next year unless Congress acts.

Tax cuts may be extended

“Early indications are that those tax cuts will be extended above and beyond 2025,” Rinn said. “The Congressional Budget Office looked at the cost of this and estimated it could be between $4.5 trillion and $5 trillion, but one could argue that the tax cuts could offset these costs if they spur economic activity.”

The amount which can pass free of federal estate, gift and generation-skipping taxes will increase in 2025 to $13.99 million per person for individuals and to $27.98 million for married couples. The annual exclusion for gifts will increase to $19,000 in 2025 from $18,000 in 2024.

“Don’t underestimate the amount clients can give in outright gifts,” Rinn said. “Clients can give away a fair amount of money through this.”

Rinn suggested advisors discuss the following estate planning techniques with clients:

• Give outright gifts to family members.
• Gift business interests to family members.
• Establish trusts such as a grantor retained annuity trust, an intentionally defective grantor trust or a spousal lifetime access trust.
• Maximizing annual exclusion gifts.

“The key is this – we are at such a pivotal spot as financial professionals to provide guidance, to provide clarity where there is uncertainty,” Rinn said. “We’re in a spot to do that. Think about protection products like life insurance and annuities. Life insurance isn’t going away anytime soon.”

 

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