A substantial number of high-net-worth investors have not done enough to prepare for a successful wealth transfer, according to a UBS Investor Watch report. The report found that half of the respondents haven't discussed wealth transfer with their heirs and 40% don't have an up-to-date will or estate plan.
Estate and financial planning may involve certain additional considerations when working with blended families, but several different trust arrangements may help. Depending on the circumstances, qualified terminable interest property trusts and other structures may be appropriate.
The Setting Every Community Up for Retirement Enhancement Act's changes to inherited IRAs raise a host of estate planning issues, writes Roger Wohlner. In this slideshow, Wohlner highlights 10 considerations for inherited IRAs, including taxes, alternatives and why it may make sense to spend down IRAs and leave other assets to heirs.
When advising clients who are thinking of selling their companies, help them consider the financial implications as well as the practical issues and psychological consequences, writes Andrew Palmer of Evoke Advisors. "[F]or many entrepreneurs, their sense of purpose is so intertwined with the business they've built over the years that a separation due to sale, despite the significant inflows of new money, creates a deep and tangible sense of loss," Palmer writes.
The yearly contribution limit for 401(k), 403(b), most 457 plans and the Thrift Savings Plan will rise to $22,500 in 2023, up from the current $20,500 limit, with inflation responsible for the record increase. In addition, contribution limits for traditional IRAs and Roth IRAs will rise from $6,000 to $6,500 next year.
The IRS has announced inflation-related adjustments for 2023 to a wide array of tax code parameters, and the shift will allow individuals to transfer as much as $12.9 million to heirs without incurring federal estate tax liabilities. In addition, the limit on annual tax-free gifts will climb by $1,000 to reach $17,000. The inflation-related adjustments will also increase the size of the standard deduction and reconfigure income tax bracket thresholds.
With inflation at a record high, 27% of retirees are spending more than they can afford, up from 17% in 2020, according to the 2022 Spending in Retirement Survey from the Employee Benefit Research Institute, but advisors may be able to help. "Advisors can help retirees and near-retirees align retirement lifestyle expectations with reality by identifying income sources and establishing a spending plan," said Bridget Bearden, research and development strategist at EBRI.
More clients are interested in environmental, social and governance investing, but financial advisors should ask themselves three key questions before recommending ESG investments, writes Yousef Abushanab, an ESG analyst with RBC Global Asset Management. They need to know if the investment is the right match for clients, how it incorporates ESG and how the fund manager approaches stewardship.
The Labor Department is proceeding with development of a proposal that could expand how "fiduciary" is defined regarding the Employee Retirement Income Security Act of 1974. The proposal is expected to emerge next year, and lawyer Fred Reish says the department might pursue a rule that aligns with the Securities and Exchange Commission's rules concerning recommendations by investment advisers and broker-dealers.
The traditional 60/40 portfolio model has shed 20% this year, fractionally above its worst ever year of performance in 2008, according to a Bloomberg analysis. However, analysts at institutions including State Street Global Markets and Morgan Stanley say it could resume a healthy performance while researchers at Vanguard Investors have advised against abandoning it at this point.
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