Read The Transcript Here:

Steven Jarvis, CPA (00:51)
Hello everyone, and welcome to the next episode of the Retirement Tax Services podcast, financial professionals edition. I’m your host, Steven Jarvis, CPA. And joining me this week is a good friend and expert in a field that I am not good in. So, David Haughton, welcome to the show. Thanks for coming on to represent wealth.com.

David Haughton (01:10)
Thanks for having me. This is awesome. I’m excited.

Steven Jarvis, CPA (01:11)
Yeah, Dave, as you know very well, there’s so much overlap between tax planning and estate planning. And I try to be as honest in life as a general rule as I can, but especially when it comes to answering questions that I have no business answering. And estate planning is an area where very quickly we get into waters that I probably shouldn’t be waiting in. But since there’s that overlap with taxes, I still get the questions a lot, which is why I appreciate not only the work that wealth.com does, the resources they create, but that you would take the time to come on and chat with me a little bit here.

David Haughton (01:39)
Yeah, I mean, and vice versa, right? It goes the other way. People think, you know, if you’re in estate planning, you know, every aspect of a 1040, you know, all of the tax rules, it’s just not the case, they’re different disciplines. There’s a lot of crossover, there’s a lot of cross knowledge, but there’s also a lot of, right, with that, it’s ripe for missing nuances and missing things that you think you know, but there are nuances there that you wanna clarify. So I think…It’s a perfect synergy of disciplines here.

Steven Jarvis, CPA (02:08)
Absolutely. Dave, for people in my audience who might not be as familiar with you, give us the quick background on you, what you were doing before you came to Wealth.com, what you’re doing at Wealth.com, and then we’ll dive into some more fun things.

David Haughton (02:18)
Sure, yeah. So currently I’m senior corporate counsel at wealth.com. So obviously, you my background is I am an attorney. I was an estate planning attorney for the first part of my career. For a better part of a decade, I was a estate planning attorney in Massachusetts and Southern New Hampshire, working directly with clients to form their estate plans. From there, I transitioned over to Commonwealth Financial Network, which is a large RIA broker dealer that… where I was a consultant for financial advisors primarily on estate planning and so advisors would come to me as a consultant bring cases and I would be one of the members of the team that would help to design those cases help point them in the right direction. I love that area. I loved going to each side of the fence. At first I was working directly with clients then with financial advisors and from there I saw Wealth.com, I was really impressed with Wealth.com and what they were doing as far as making estate planning more accessible. And so I was so impressed with it that I decided to come over and be a part of it. Now as part of a Wealth.com, for those who don’t know, it’s a solution for financial advisors to use with their clients across the net worth spectrum. Whether it be helping clients who let’s say they’re mass affluent to high net worth create estate plans. So that could be wills, revocable trusts, powers of attorney, healthcare powers of attorney, all the way to ultra high net worth where there are tools to be able to read existing estate plans through artificial intelligence to get a quick summary and then be able to model out those plans, visualize them and maybe be able to offer some guidance on how to mitigate their tax bill or how to get more assets to their beneficiaries.

Steven Jarvis, CPA (03:59)
Appreciate you sharing the background, and I love how you’re illustrating the range of services that Wealth.com can help with. In 2023 when we kicked off the summit, which we’re now in our third year of, Wealth.com was one of the first partners that came and made that a reality. So we’ve been big fans for a long time. And beyond that, I’ve always really appreciated that there’s such a easy resource available to advisors to do more on that topic. Because for me, when it comes to estate planning, about as far as I’ll get, because of course it comes up from the the tax aspect of it. People will pay; they don’t want to just minimize taxes during their lifetime, but for their heirs, things like that. And so I’ll definitely talk to people about how step up and basis works and making sure we understand some things about making sure we’re not gifting during our lifetime. If we can wait and let those things pass and have that step up with the and with the the big beautiful bill, the estate tax exemption is going to remain very very high for the foreseeable future and so we pretty quickly, maybe that’s not the right way to put it, there are a lot of clients that what traditionally might be thought of as complex estate planning is just like not really even an area of focus like 30 million dollars for me and my wife, there’s no, we’ve got no reason to think about this, what Steven told me about estate planning is all I need.

(05:05)
So Dave, help us a little bit more with, what should advisors be looking for? Because we use a couple of terms in there that the whole industry uses as far as massive, fluent, high net worth, ultra high net worth. But I think everybody defines those a little bit differently. So I guess really what I’m getting at is, what are some more tangible things advisors can be on the lookout for to say, OK, here are clients that we need to have a more detailed estate planning conversation with?

David Haughton (05:26)
Yeah, and I think it’s important because everyone needs an estate plan. I think if you stop someone on the street, no matter who you’re stopping, you said, is it important that you have a will? Is it important that you protect assets that are being passed on to your children or to your beneficiaries? Almost everyone would say yes. And then the second question would be, do you have that? And they would say no. Almost all the time, right? Because there’s only about a third of people have an estate plan. And what is an estate plan? Because sometimes that’s a misnomer because…In actuality, everyone has an estate plan, right? It’s just, did you draw it up and make the documents? Or is the state gonna dictate it based on the statutes that the legislature created that shows how your estate should flow when you pass away? Or if you become incapacitated, who’s gonna be in charge? And usually that’s gonna go through the court. So really it doesn’t matter where you are on the network spectrum. You need some kind of estate plan or even on the age spectrum, right? We have a lot of clients that…have children that are heading off to college, right? They’re in their 50s, they’re in their 60s, they’ve accumulated their wealth, they have children who are heading off to college, they’ve turned 18, they’re still dependents when it comes to their tax return, when it comes to their health insurance, they live under their roof, but they can’t make decisions for them. Even those kids need to have at least healthcare powers of attorney and powers of attorney that will make the parents feel much more…have a lot more peace of mind that things will go smoothly if something happens to that child. And it goes obviously all the way through, you know, once you have children, it’s important to have guardians for those children set up through your will. Obviously, people are married, there are two sets of in-laws, there are all other kinds of people that can cause dispute. It’s important to have agreement in that and come to some kind of formal legal arrangement that’s gonna show who are gonna be the guardians of those children.

(07:15)
Then you start to accumulate wealth. And as time goes on, it gets more sophisticated. You start bringing in things like revocable trusts and estate tax planning and things of that nature. So that’s why just think estate planning is just critical for literally everyone who’s over the age of majority. And it can affect every client that a person has as well as their children. A lot of times those children aren’t gonna be the ones who are gonna be motivated to get that plan in place. So helping their parents to provide access to an area where they can help their children get a plan in place will give peace of mind too. But the other thing is, when we’re talking about this big, beautiful bill, the estate tax has gone up to $15 million. Well, why does that mean that I need to either look at my estate plan or revisit it? Well, a couple of things. Number one, we don’t know where the tax law is gonna go. We say it’s permanent. Yeah, know, air quotes. We don’t know where it’s going to go. If the political pendulum had swung the other way, you know, it was out there that it was going to be a $3.5 million estate tax threshold, loss of a step-up in basis, loss of grantor trusts. So there was a lot out there that were actually proposed. You know, they were in budgets. They were actually legislation proposed. So it’s not out of the realm of possibilities that at four years from now, you know, this estate tax comes way down.

David Haughton (08:36)
So it’s still important to be looking at possibly getting assets out of the estate if you’re high net worth, ultra high net worth, and at least having flexibility in your plan to make sure that if you are subject to an estate tax, that you will be able to plan for it. And then of course, there are so many other areas that an estate plan addresses. know, what happens if you become incapacitated during your lifetime? Who’s gonna manage the property for you? What if you have children who have substance abuse issues or they’re a spendthrift, they have gambling issues, they’re just not mature. How are you leaving the assets to them? How are you gonna make sure that they’re not dissipated? So estate planning just runs the full gamut of issues. And I think people focus on the estate tax part, but only a really small minority are actually gonna be affected by that. Doesn’t mean you don’t need to plan for it, you need to, but. There’s so many other reasons to have an estate plan that people don’t. And I just don’t want them to get lulled into a false sense of security just because of this new bill.

Steven Jarvis, CPA (09:333)
Well, Dave, I love so much what you said in there. And I want to really hammer on that last point because you brought it up early on, too of and I think the way you kind of commented on that was everyone has an estate plan. It’s just that some people are doing it on purpose and some people are leaving it to the state, which rings true with taxes as well. Right. I mean, every year people are going to have a tax bill that comes to. Did you proactively plan for it? Did you just let it happen to you? And similar to what we talk about all the time on tax planning, it sounds like you would agree on the estate side that I mean, taxes can be a factor in how you do your estate plan, but it’s not even the primary reason. It’s not the starting point for the discussion. Like there’s so many, there’s so many other things that we need to figure out as far as what our goals are, what we want to have happen from to our family. Like it’s not just, Hey, how do I stick it to uncle Sam? Like I’m all for keeping as much of your money as you possibly can and passing on as much as your money as you pass possibly can. But I like that you wrapped up at the end there with, this isn’t just about how much can we save on taxes because…Depending on when someone passes away and what the current tax laws are, maybe they’ll get hit with the estate tax, maybe they won’t. But regardless, there are still so many other considerations that are going to have an impact on your legacy and what happens to your wealth beyond just the taxes.

David Haughton (10:38)
Yeah, and I also think that people tend to think of what about my estate? What happens to me? I’m going to leave it to my children. You know, the other thing, even from a tax planning perspective, people sometimes aren’t focused on where the money is going and what’s going to happen. Right. We talk about, you know, once it reaches the beneficiary, let’s say I, you know, my estate is comprised of a very large IRA. I have two children. One lives in Florida and as a teacher, their income is modest. The other is a doctor. They live in California. Well, they’re going to be paying different in taxes once they need to withdraw from that IRA. Maybe that’s something to think about to plan for rather than just splitting it 50-50. And the other thing is maybe I don’t have an estate tax issue right now, but maybe my children have done really well. And if I lump my assets on top of them via inheritance and don’t take action to try and keep it out of their estate, maybe they’re going to have an estate tax issue themselves. So there’s really some comprehensive planning that can go in if you’re not thinking about all the different angles that you could miss, even some of the tax planning opportunities.

Commercial (11:38)
retirementtaxservices.com/summit

Steven Jarvis, CPA (12:18)
Dave, one of the things that I run into on the tax side of things, speaking to financial advisors is that most financial advisors are not CPAs. And so I work with them really closely on how do we, how do we find this balance of as the financial advisor, you’re in such a good place to be aware of so much of what’s going on in the client’s life and to start a lot of these great conversations to identify potential opportunities. But at of the day, most advisors are still not CPAs. And so there’s got to be some bridging of that gap. And the same thing exists on the estate planning side, maybe even to a little bit higher level because we have this concept of the unintentional practice of law. And so I know there are advisors both on the tax and estate side who definitely take more of the approach of, geez, I’m just going to stay away from it so I don’t get myself in trouble. And I know that’s part of why wealth.com exists is to help bridge that gap. But so Dave, talk from a high level for advisors in general, whether they’re on wealth.com or not, of how they can think about those things and how they can do more for their clients without unintentionally becoming attorneys. And then maybe speak a little bit to how wealth.com helps do that even more.

David Haughton (13:16)
Absolutely. Yeah, I think it’s so critical. You know, when I was practicing law, usually what would happen is I would sit down with a client, maybe a financial advisor had, you know, referred them, but this would probably be the first time I was meeting them. We’d have a, 60-minute consultation and then from there, maybe a follow up meeting, maybe not. And then we produce their documents that dictate what happens with it when they pass away all their tax planning opportunities from a state perspective and kind of get to all their goals and priorities in that short period of time. When we all know now that the advisor has a much more comprehensive relationship with that client. It’s probably over years, a lot of times from a compliance perspective, they’re required to meet with them every year. They know their family dynamics, their level of sophistication, their behavioral tendencies, all these things that are so critical that could help the client to able to a state plan and give so much context, even if it is through an attorney, be able to give so much context to be able to help with that plan. And for the longest time, there’s just been just this bifurcation between advisors in the estate planning side because of that concern about the unauthorized practice of law, which is a valid concern, but every client needs education.

(14:27)
And there are educational resources there where…you can educate the client on what their available options are without actually issuing a recommendation. And I think that’s what’s really critical. I mean, we see with the CFP, I’m a CPWA practitioner, know, big parts of these curriculums, which are targeted towards financial advisors are estate planning. And that’s on purpose because estate planning is a big part of financial planning. I you know, I think about 90% of financial advisors end up losing the assets under management at an energy generational transfer because you know the next generation the kids they bring the money elsewhere to a new financial advisor. So it’s not just helping the clients with peace of mind that’s important but also from a business standpoint it’s important to help with estate planning because you can help form a relationship with that next generation you can retain the assets and continue to help them preserve them, but if you’re kind of just saying you know let the chips fall where they may I’ll refer you out do what you gotta do, but it’s not anything to do with me. That’s not a great experience for the client because they’re hoping based on the relationship with the advisor that they’re providing comprehensive financial services, and estate planning is one of them. So obviously, wealth.com, one of the things that I was so drawn to with the company is making estate planning much more accessible. So clients can go on, they can create their basic estate plan, their wills, revocable trust, powers of attorneys, those base documents that everyone needs. And the way that wealth.com was created was to help protect the advisor from that unauthorized practice of law. So within the platform, there’s tons of education that a client can go in and take that advisor provides access to, but the advisor does not have direct access to be able to make decisions on behalf of the client. They invite the client to create their estate plan and the client themselves are the ones who are going through that process to create their documents. And throughout that whole process, they have the option to reach out to an attorney from within our network. If they hit some kind of firewall that they have a special needs child or there’s some level of sophistication that they need, some level of customization that they need, they can always reach out to an attorney. So the idea is to keep the advisor safe, but make estate planning much more accessible for everybody.

Steven Jarvis, CPA (16:384)
David, it really stood out to me as you were talking in there about that collaboration between advisors and estate planning attorneys and how by default, it’s almost like, let’s toss the ball over a big tall fence that we can’t see through and hope for the best. And one of the analogies that was given to me that’s always really resonated is whether it’s tax planning or estate planning, when you go from the financial advisor who’s having that more in-depth conversation with the client who really understands their goals, their family situation, their dynamics, and what they want the desired outcome to be. That’s a very different conversation than now, and a state planning attorney has to write that up in a document that meets all of the rules and laws and checks all the boxes. And so if there isn’t collaboration, it’s kind of like sticking something into Google Translate into another language, whatever, pick whatever language you want. If we go English to Greek, and then we take the translation from Greek, and then we put it into a different translator back into English, and then compare those two English versions, they’re not going to be the same.

(17:31)
And so as I talk to financial advisors, when there isn’t that collaboration, again, whether it’s the tax planning professional or the estate planning professional, if it’s just one directional of, go put this in a document, it’s not that the tax professional, the estate planning attorney isn’t good at their job. It’s that they have a different focus. They’re trying to say, OK, how do I get this all into the right boxes to accomplish what we’re trying to accomplish? And if there isn’t that last piece of, but when this all goes down, like, is this going to have the outcome in real life that we wanted? That’s why there’s so much value. And I love what wealth.com is doing because it feels like, I’m not an advisor myself as I talk to advisors, because I work with a lot of advisors who use wealth.com. And as I talk to them, it feels like it makes the whole process more accessible. So the advisors can be more involved in that conversation to say, okay, did this will, did this trust, did this estate planning document accomplish what we actually wanted it to accomplish?

David Haughton (18:23)
Yeah, absolutely. And I think it should be better as far as the collaboration between the attorney, the advisor, and the CPA. And I always go back to the story I once had, and this involves a CPA, not a financial advisor. But I remember we had a client come in back when I was practicing estate planning who, ultra high net worth, and they were creating a estate plan for them. And part of it was creating a family limited partnership, get discounted gifts out, the idea was to reach their children. Set up the whole plan was gonna work great, was gonna save a lot in federal and Massachusetts estate taxes, but it would require some administration, right, in the meantime. So over the next year, they came back for an annual review, found out they followed nothing operational they were supposed to, didn’t open the accounts they were supposed to open, they deposited checks in the wrong place. Talked to the CPA after that.

(19:10)
And I remember the CPA said, well, I would have told you he’s not going to do, he doesn’t fall through in anything. You should add something much more simple in place, but didn’t have that context at the beginning because the CPA wasn’t involved at the start. And so it was a good learning process to make sure that all the right professionals are in place, because sometimes it’s behavioral. Sometimes a client can be super on board for everything you’re doing is going to save them a lot of money, but they don’t know themselves as much as some of the other professionals who are in their orbit know them, that can give some really good context to drive the planning to a different spot.

Steven Jarvis, CPA (19:41)
That’s such a good reminder, David. It reminds me of a client who came to me who, good for them for being honest. They basically said, hey, I saw this YouTube thing about how I can do this. I think it was a 1031 exchange kind of a thing that I can do this thing where I can sell my rental property and not pay the taxes. Like, Steven, is that a real thing? Said, absolutely, let’s talk about what that looks like. And I knew enough about him that he was super excited to be retiring and not having a bunch of day-to-day responsibilities. And so I said, okay, if we do this, the kind of the whole premise behind it is that it’s an exchange for a like kind property. And so you’re going to end up with another property, you’re either going to hire a management company, you’re going to keep renting that out yourself, like, and eventually those taxes are still going to come due. And so as we talked through it, to point about the administration, as we talked through what his life would look like, he’s like, you know what, like, totally see how that would work. I just don’t want to deal with it. Fantastic, great, pay the taxes and move on, like be done with the IRS and let’s move on. And for him, that was the right answer because he just, even though we talked to a couple of different ways of how he could limit his ongoing administrative responsibilities, he’s like, nope, I just want to be done. So super, easiest thing is here’s our route. But so understanding those things beyond what’s just on the paper is so important to creating great quality outcomes.

David Haughton (20:52)
Yeah, I mean, it’s a big part of it. I if someone just gave me their a narrative of their family structure and their assets, I could create an estate plan for him. It doesn’t mean that’s one that’s good for them, right? Because it might be the one that saves the most taxes. It might be the one that avoids probate, whatever the case is. But it’s not necessarily in line with that, what their priorities are and how they feel about certain things. I can remember one client that they wanted to gift a property, real estate, a rental property into an irrevocable trust that was outside of their estate because they wanted to save on Massachusetts state taxes for their child. And did the, did the calculation and I realized, Oh, you know what? Like losing the step up in base, there’s like almost no basis on this property. So you don’t lose the step up in basis. You’re probably, it’s probably going to be worse off. You’d probably rather get the step up than try to save on the Massachusetts estate taxes. And they said to me, good, I don’t want them to sell. I want to disincentivize him from selling. So if I can save on the estate taxes and he’s stuck with that tax bill, I’m okay with that. And you would never think that someone would think that way. But everyone has different priorities. It’s not for me to impart that on them.

Steven Jarvis, CPA (22:01)
That’s really interesting. Yeah, you’re absolutely right. That’s not what you would typically expect. Dave, we’re a couple of months now into the big beautiful bill having passed, and we’ve got a few months left before the end of the year. From an estate planning side, is there anything that stood out to you of things that advisors should really be thinking about that they need to get done before the end of the year? Or is this more just a reminder, like we were talking about earlier, that everyone really should have an estate plan? We need to be having these conversations. Like, what’s the sense of urgency because of the most recent change?

David Haughton (22:30)
I think the urgency has lessened a little bit. I’m a little bit concerned that lack of urgency could turn into procrastination. That’s a bit of my concern because certainly Sunset was talked about for years and years and years. I mean, did webinars and articles on it. How critical it was to plan for Sunset because we all thought it was coming. Now there has certainly been some leeway that there’s some time to do some planning. But still, like we discussed, know, the political, we don’t know where the political winds are going to shift, could come back around that estate tax could go down. So it’s still really important to be looking at things like getting the assets out of the estate while it’s unprecedentedly high. Still important about looking at things like Roth conversions with this new 10-year rule for beneficiaries, if you are going to be in a low income tax bracket in those beneficiaries that you’re leaving the IRA to are going to be in really their highest earning years and high income tax brackets. So there’s still important things to look at. From an estate planning perspective, I think there are some from a tax planning perspective, I’m sure that you can speak to before the end of the year. But I think from an estate planning perspective, it hasn’t decreased the urgency that you should do in a estate plan. From an estate tax planning perspective, luckily, there is a little bit more breathing room for the next few years to do some estate tax planning.

Steven Jarvis, CPA (23:44)
Well, and I certainly appreciate that. Well, you admitted that there’s maybe a less of a sense of urgency to get it done right now from the estate tax side, that you have a little bit of concern that that lack of urgency might create some unnecessary delays. And we certainly saw that with the when Secure 2.0 was getting clarified around whether RMDs are going to be mandated for inherited IRAs. And most people’s, every time the IRS punted and said, OK, we’re going to waive them this year, most advisors reaction was, great, that’s another year I can wait. And I was like, no, no, hold on guys. Don’t let Congress dictate your sense of urgency. Just because you don’t have to do it yet doesn’t mean there aren’t advantages to making a plan now. And I was banging that drum pretty hard. I think a few people listened to me, maybe not as many as should have.

David Haughton (24:24)
Well, even in that scenario, right? 10 was becoming 9, was becoming 8, was becoming 7. You know? Yeah.

Steven Jarvis, CPA (24:31)
Yep, yep, yep. The number of years is going down and just because the IRS said here’s the required minimum amount doesn’t mean that that was the best amount to do each year. There are definitely clients where it’s like, hey, you’re only two years away from your own RMD starting. So why don’t we get some of this money out now while we’re in a little bit lower year or a little bit lower tax bracket? Definitely, there’s always more than one factor to consider the joys of what we do. Dave, any other thoughts top of mind for you as you think about what advisors should be thinking about around estate planning?

David Haughton (24:56)
I think this was great. You, this is a great discussion. I just think it’s such a natural connection between estate planning and tax planning. And I think they run into each other all the time. You know, when I was in advanced planning, both of you didn’t when you picked up the phone, it could have been one of those both of them or them combined. So I think it’s really important to understand that financial planning is estate planning, is tax planning. Financial advisors really need to make sure that without crossing the line over the line into necessarily unauthorized practice of law or areas in tax planning that they’re not supposed to dive, they should be looking at these to at least provide an education to clients to make sure that they have a good tax plan in place, that they have a good estate plan in place, even if you’re not necessarily the one who’s going to be able to implement it, at least give them access to that to be able to make sure from a comprehensive perspective they’re taken care of.

Steven Jarvis, CPA (25:51)
Yeah, absolutely. And if you’re not one of the many, advisors who are already on wealth.com, go out to wealth.com to check out what they’re doing. It’s a fantastic resource around estate planning that helps advisors get so much more done, Dave, to your point, without having to cross over and become an attorney themselves. So certainly worth checking out. I hear nothing but great reviews from the advisors on that platform. Dave, thanks so much for being here. I really appreciate your time. It’s always great being able to chat about these things.

David Haughton (26:14)
Yeah, thanks for having me. This was awesome.

Steven Jarvis, CPA (26:16)
And to everyone listening, until next time, good luck out ther,e and remember to tip your server, not the IRS.