We conducted the survey online at www.estateplanningpartners .com, promoting it to our own clients and to members of our online discussion forum. We also encouraged our clients and members to forward the hyperlink of the survey to their colleagues and to other discussion forums. Additionally, news of the survey was carried over the online newswires, including the Yahoo! Bizwire. More than 200 attorneys responded, ranging from those with solo practices to attorneys in national firms with 100 or more attorneys. To encourage candid responses, we did not ask the attorneys to identify themselves by name or firm nor did we include any tracking mechanisms on our Web site that would allow us to identify them. All of the respondents remained completely anonymous. We did, however, ask for some basic demographic information to assist in analyzing the results. More than half of the respondents (53 percent) have been practicing in this area for more than 10 years, fully 26 percent listed more than 20 years of experience. Two-thirds of the respondents were solo practitioners or from small firms, 11 percent were from mid-sized firms of less than 50 attorneys, and 18 percent said they practiced in firms of 50 or more attorneys.
A little more than half (51 percent) of our respondents said they believe Congress will enact some form of estate tax repeal this year. While 73 percent said they were concerned about how repeal would affect their practices, only about seven percent said they would leave the practice of estate planning if the federal estate tax were repealed. We did not ask whether the attorneys favored or opposed estate tax repeal … we felt that was not a fair question. Still, we did ask whether the attorney had contacted their congressman or senator regarding the issue. Only 16 percent said they had. (We wondered whether, if Congress were contemplating a legislative change that would significantly impact other business owners, they might have heard from more of them.) What about the future of estate planning? More than three-fourths (76 percent) of our respondents said they see significant estate planning opportunities even if the federal estate tax is repealed. Still, most said they would have to change their practice focus to take advantage of these opportunities. Of respondents who said they would change their practice focus: • 80 percent said they would focus more on estate, trust and probate administration;
• 63 percent said they would focus more on probate avoidance planning;
• 48 percent said they would focus more on business/corporate law;
• 38 percent said they would focus more on elder law;
• 26 percent said they would focus more on financial/investment planning; and
• 25 percent said they would focus more on contested estate litigation.
Because we wanted to give the attorneys a chance to express their own thoughts on these issues, we included two open-ended questions. It was not necessary to respond to these questions in order to continue through the survey, and not everyone bothered to write comments. However, we did receive more than 200 free-form comments. Some were only a few words, some were complete paragraphs, and even though our online form restricted responses to 150 words, some attorneys found ways to outsmart our software and submitted entire treatises on the topics. Our first open-ended question, “Please explain your major concerns (regarding repeal of the federal estate tax)” elicited the most voluminous and vociferous responses. After analyzing the responses, we categorized them into four major areas of concern. Motivation. Forty-eight percent of those commenting listed a lack of motivation for clients to move forward with their planning as a major concern for their practice. Said one respondent: “While I do not expect complete repeal to be likely, I do believe we will see a significant increase in personal exemptions and/or rate reductions. My main concern is that my rainbroker referral sources are largely tax-driven and will no longer see the significant value of good estate planning. We can talk all we want about personal goals, family protections, etc., but it is the specter of the estate tax which brings many of the wealthier clients to the door.” Most respondents pointed out that, though estate tax planning is only one aspect of comprehensive planning, it often is the one that prompts clients to begin the process, and keeps them motivated to see it through. One comment illustrates this concern: “My main concern is that the estate tax is the impetus that causes many people to get into the attorney’s office to talk about creating an estate plan. It’s a good hot-button issue. If the tax is repealed or phased out, this will likely cause a false sense of security and the feeling that no planning is now necessary. As we know this couldn’t be further from the truth.” Many respondents were concerned about how tax repeal may be played in the popular press, to the ultimate detriment of clients: “Any repeal, or phase-out, will be publicized as a repeal and people who still need to plan will be lulled into complacency thinking they need do nothing.” Another said, “I know the reasons for estate planning other than estate taxes, but the media will say there is no need for expensive planning and it will take some time to re-educate the public and referral sources on the issue.” Clients often come to an attorney’s office because of the referral of a financial or investment advisor. Some of our respondents were concerned that these advisors may lose their motivation to recommend comprehensive estate planning to their clients: “Oftentimes the estate tax issue is the easiest for referral sources to discuss and use to send referrals to my office. Although I have positioned myself as a relationship/issue-based trusts and estates attorney with my referral sources, I still see them using the ‘tax scare’ technique to send a large portion of referrals my way. Therefore, if the federal estate tax repeal occurs, my referral sources, in the short-term, will have to be educated to shift their focus away from the ‘easy’ tax issue to the ‘more difficult’ family issues.” Revenue. Twenty-six percent of the comments included references to concerns about reduced revenue. One blunt respondent said his main concern was “poverty.” Several respondents said estate tax repeal would result in fewer clients seeking estate planning services, and thus a loss of revenue, stating simply “client volume,” or “fewer clients.” One explained: “The possibility of repeal has already depressed the demand for our services. Actual repeal would eliminate most of our business.” Some were mainly concerned they would have to lower their fees if they could no longer justify them with corresponding tax savings: “I believe clients will still need my services, but the perceived value of those services might be less. If I am not saving them a lot of money with my work, then they might feel that a large fee is not justified, and/or they might feel comfortable going to someone with less experience or doing the work themselves. I can probably counteract this to some degree with educational marketing, but it is still a significant possibility.” Finally, several respondents pointed out that, in the absence of federal estate and gift taxes, the higher-fee, sophisticated tax-planning strategies will no longer be necessary: “(Repeal) would eliminate a lot of the tax planning that we do and thus reduce the value that we provide to clients. Therefore, we would not be able to charge as much for our services,” and “ (Repeal would) mitigate the need for sophisticated planning, which will result in lost revenue.” Said one respondent: “After 30 years in practice, I believe (estate tax repeal) will be absolutely devastating, and I am unsure how I will even earn a living, since I know nothing else.” Focus. Twenty percent of those commenting said their main concern was a need to change the focus of their practice — and their marketing messages — away from estate taxes and toward other client concerns. Many respondents see this change in focus as a positive, and perhaps long-overdue change to a more client-centered practice: “It will require that I focus on the core areas of client concern, namely, providing care and guidance for future generations and preserving the testator’s values, rather than avoidance of a patently unfair tax,” and “A more personalized practice focused on ‘family values’ and the ‘warm and fuzzies’ of estate planning will be necessary.” Though some see the focus away from estate taxes as positive for the client, they are concerned about implementing and communicating this new focus to potential clients and their financial advisors: “It will be harder to motivate clients to do the necessary planning when there are no threats of large tax bills and monetary tax savings to demonstrate the benefits. It will be a ‘harder sell’ and the focus will have to change.” Finally, many respondents stated they will have to change their practice focus away from sophisticated tax planning to include other, related services: “Well, 100 percent of my practice is estate planning. Therefore, I would have to refocus within the field,” and “My main concern is properly identifying and prioritizing the new needs my clients will have after the tax is repealed.” Others say they are concerned about the time and money required to change their practice focus: “My main concern is the substantial investment into new methods of tax planning… including, but not limited to becoming more expert in capital gains tax planning. Further adjustments will be necessary to make me, as an estate planning attorney, stand out.” Education. Thirteen percent of those responding said their main concern was education — specifically educating clients about the ongoing needs for estate planning beyond federal estate taxes: “(My main concern is) educating clients regarding the new horizon, pitfalls and opportunities,” and “Estate tax repeal will likely lead to public perception that no estate planning is necessary any longer — which is totally misguided. The public has been misled by professionals for too many years that estate planning is nothing more than estate and gift tax planning.” But, attorneys say that getting this new message across may be difficult: “Most of my clients express to me that they are planning to avoid the high costs associated with death and asset transfer. While we know there are other reasons to plan, the general public has not been educated sufficiently about the non-tax reasons. To begin such an education program now would look like sour grapes and in any event would take a long time to sink in to the public at large.”
Despite the challenges and concerns expressed in their answers, most respondents remained “bullish” on the future of estate planning. When asked if they saw significant estate planning opportunities even if the federal estate tax is repealed, 76 percent said “Yes” and many of those took time to explain themselves with well-reasoned commentary. Where do attorneys say those planning opportunities exist? Primarily in five general areas, the first being “traditional” areas that many attorneys see as untouched by estate tax repeal; and then in four new areas of opportunity that they say are “created” (or enhanced) by repeal (or reform). Traditional planning continues. The attorneys point out that much of the work they currently do for clients is unrelated to the federal estate tax, and so will not be affected by repeal. As one respondent said, “Planning opportunities continue to exist with respect to business continuation, charitable giving, planning with retirement assets for transfers at death and special needs trusts.” Other attorneys focus on the family issues of estate planning, “Families will always have a need to assure transfers are made according to their preferences. This includes making sure succeeding generations are equipped to receive their bounty. Clients also want to make sure their family enjoys the fruits of their labor, not a judgment creditor,” and “A different focus on family planning issues relating to the transfer of wealth (i.e., protection of spouses and beneficiaries, planning for second marriages and blended families, ethical Wills, etc.) This will require significant marketing efforts as many people perceive that taxes are the primary reason to create an estate plan.” One respondent succinctly said, “Opportunities? You name it! Business succession planning, charitable estate planning, special needs planning, it is all the same with the exception of the tax question.”
• Income Tax Planning. Twenty percent of those responding indicated that income tax planning could become a bigger part of their practice. One practitioner explained: “The repeal of estate and gift taxes, whether or not carryover basis is substituted for stepped-up basis, will provide new opportunities to avoid state and local income taxes. I believe this will become a significant new area of practice especially by using trusts in jurisdictions that do not impose state income taxes on trust income.” • Reviews and revisions. Any major change in tax law may prompt a need to review and revise current planning. However, attorneys believe that repeal of the estate tax would require massive client reviews and plan revisions: “I believe that almost all client files will have to be reviewed to determine what, if any, changes are needed to address the tax law change.” While this may result in some initial activity, most attorneys view this as only a short-term, transitional issue: “There will be quite a bit of amending of trust work, as well as helping/educating others of the true nature of estate planning, but this is primarily temporary in the form of updating existing tax-driven plans.” • Asset protection and control. In the absence of federal estate and gift taxes, about 12 percent of respondents commented that their clients will have more planning options to protect their assets from future creditors and to maintain control over the distribution and use of those assets. One respondent summed with this statement, “(The most significant new opportunities after repeal are) asset protection and control of assets for future generations.” • Intestacy. One respondent took time to mention the obvious, “I do suspect that we will start getting some pretty good intestacy work because a lot of people will think that they don’t have to do ANYTHING now.”
It is clear from the survey results that attorneys expect a repeal of the federal estate and gift taxes to have a significant impact on their practices. Only one practitioner appeared fearless with his statement, “Our practice will remain largely the same. Our firm mission is to help our clients maintain control over their affairs. Estate tax planning is a sub-issue. Repeal will not affect us much at all.” Still, most attorneys predict a decline in traditional estate planning activity in the absence of federal estate taxes as a motivating factor. It is reasonable to believe that if one strong financial motivation is removed, certainly some people will choose not to address the difficult and complex emotional issues intrinsic to estate planning. Nonetheless, as one respondent pointed out, “Congress cannot repeal death. Until such time as they can, there will still be a need for estate planning.” While the vast majority of attorneys say they plan to stay in the practice of estate planning, the question of financial viability looms large. Certainly practice focus will change. No doubt attorneys will feel a pressure to lower their fees in the absence of sophisticated tax planning. What then, will be the keys to maintaining a viable practice in this area? The first step, of course, is to recognize the challenges and develop a plan. That plan should include steps to broaden the practice focus beyond estate tax planning, to implement systems that will make the practice more efficient and thus more profitable under a constrained fee structure, and to make a strong commitment to marketing and client education. Estate planning has always been more about relationships and family issues than about money and taxes… but we find it easier to talk about money and taxes, to quantify them and illustrate them in neat Powerpoint presentations. As one respondent said, we will have to “shift focus away from the easy tax issue, to the more difficult family issues.” For full survey results, click here.