Matthews: Lawyers can position themselves as key advisors
By Craig Matthews, CEO, LEAP Estates
The “great wealth transfer” refers to the historic shift in wealth we are witnessing now, and over the coming decades. Experts estimate that over £5.5 trillion will be passed down before the end of 2050, making it a significant event in financial and estate planning.
At the centre of this significant wealth transfer are baby boomers, born between 1946 and 1964, who are expected to pass their accumulated wealth to Generation X (born 1965–1980) and Millennials (born 1981–1996). On average, individuals inherit wealth at the age of 58, which means we are at the cusp of this massive wealth shift.
This wealth transfer brings unique challenges, but also numerous opportunities for legal and accounting professionals to assist clients in estate planning, tax strategies, and financial management.
For legal professionals, the wealth transfer creates an increasing demand for drafting complex wills, trusts, and long-term care plans due to larger estate sizes. Accountants, on the other hand, play a critical role in advising clients on how to minimise tax liabilities while efficiently managing wealth transfers.
Challenges faced
1 Generational Communication Gaps
One of the greatest challenges lawyers and accountants will face during this Great Wealth Transfer will be facilitating conversations between different generations about sensitive issues like inheritance and death. Baby boomers tend to be more reserved about discussing financial matters, while Millennials and Generation Z are more comfortable with digital communication but may lack the experience to navigate face-to-face discussions about complex family financial dynamics.
Lawyers must encourage open conversations about estate planning with their older clients. Often, baby boomers are reluctant to discuss wealth and death due to cultural norms, making it necessary for lawyers to create an environment where clients feel comfortable sharing their goals. Accountants face similar challenges when discussing wealth transfer strategies, particularly with clients who may not have been proactive in financial planning. Financial literacy among the younger generations also poses challenges, as they may not fully grasp the complexities of managing inherited wealth.
2 Complex Tax Planning
A significant concern in wealth transfers is the potential tax burden on beneficiaries. Large estates can push individuals into higher tax brackets due to inheritance taxes and capital gains, fundamentally changing their financial profiles. Beneficiaries who were previously non-taxable may suddenly face substantial tax liabilities, which can complicate the transfer process.
Lawyers will need to ensure that estate plans are designed to account for future wealth transfers and tax implications. Similarly, accountants must help clients manage tax changes by implementing strategies such as gifting assets, creating trusts, or making charitable donations to reduce tax burdens.
Opportunities for lawyers
1 Expanded Estate Planning Services
The scale of wealth being transferred presents law firms with an opportunity to expand their estate planning services beyond basic will drafting. Clients will need more comprehensive planning that addresses long-term tax implications, asset protection, and anticipated future wealth. Lawyers can engage clients in conversations about potential inheritances, ensuring that their estate plans account for both current and future assets.
By taking a proactive, holistic approach to estate planning, lawyers can position themselves as key advisors, guiding clients through the complexities of managing wealth transfers.
2 Cross-Departmental Collaboration
Estate planning frequently overlaps with other legal areas such as tax law, family law, and business law. This creates an opportunity for law firms to foster collaboration between departments to provide clients with seamless and integrated legal services. By working together, different departments can ensure that clients’ legal and financial needs are comprehensively addressed, enhancing the firm’s reputation and client satisfaction.
3 Client Retention and Engagement
Assisting clients through the wealth transfer process can help law firms build long-term relationships with clients and their families. Regularly reviewing estate plans and keeping clients informed about potential changes in their financial situations not only fosters trust but also solidifies the lawyer’s role as a valuable advisor.
Engaging younger generations, who will eventually inherit wealth, is also critical. By helping them understand estate planning, lawyers can establish lasting relationships that extend beyond the initial wealth transfer.
Opportunities for accountants
1 Tax Planning and Wealth Management
The wealth transfer offers accountants opportunities to provide essential tax planning and wealth management services. As clients inherit wealth, they will need advice on managing it efficiently while minimising tax liabilities. Accountants can help clients use trusts, gifting strategies, and other tools to ensure that wealth is transferred in a tax-efficient manner.
Additionally, accountants can advise clients on how their financial profiles will change post-inheritance, helping them restructure investment portfolios to account for new assets and minimise tax exposure.
2 Estate and Succession Planning
Collaborating with lawyers, accountants can provide comprehensive estate and succession planning services that account for tax consequences, family dynamics, and long-term financial goals. This collaborative approach ensures that clients are well-prepared for the financial and legal implications of wealth transfers.
The role of estate planning technology
Modern estate planning technology plays a crucial role in helping lawyers and accountants manage the complexities of the Great Wealth Transfer. From automating document drafting to improving client communication, legal technology enhances efficiency and provides real-time insights for informed decision-making.
1 Automation and Efficiency
Estate planning technology enables automation of tasks such as drafting estate planning documents and managing client data. Automated workflows ensure that all necessary steps are completed, reducing errors and streamlining the estate planning process.
2 Improved Client Communication
Estate planning software enhances communication between lawyers and clients by providing secure, online access to important documents and information. Younger generations, in particular, appreciate the convenience of digital communication over traditional face-to-face meetings. Additionally, modern software suppliers like LEAP Estates fosters collaboration between departments within a law or accountancy firm, ensuring clients receive integrated and comprehensive services.
3 Data Management and Analytics
As the amount of wealth being transferred increases, managing client data effectively becomes critical. The latest software with advanced analytics capabilities allows professionals to analyse trends, predict outcomes, and make more informed decisions. Predictive analytics can help firms identify clients who may benefit from estate planning services, allowing professionals to offer tailored advice and enhance client retention.
Extra considerations for lawyers
As the value of estates increases, there is a growing likelihood of disputes among beneficiaries, particularly in high-value cases. Lawyers need to be vigilant in documenting clients’ intentions clearly and ensuring that estate plans are updated regularly to reflect changes in financial circumstances. Estate disputes can be emotional, especially when family homes or sentimental assets are involved, adding complexity to estate planning.
Lawyers must also stay informed about changing tax laws, such as the potential removal of certain exemptions. Changes in tax policy may require clients to sell properties to meet inheritance tax obligations, leading to emotional and financial challenges. Educating clients on the benefits of proactive estate planning is key to minimising disputes and ensuring smoother wealth transfers.
Conclusion
The Great Wealth Transfer presents significant challenges and opportunities for legal and accounting professionals. While generational communication gaps and complex tax planning pose difficulties, the vast wealth being transferred offers professionals the chance to provide valuable, comprehensive services. By leveraging technology and focusing on long-term client relationships, lawyers and accountants can position themselves as trusted advisors, guiding clients through the largest wealth transfer in history. Estate planning software, in particular, will play a crucial role in streamlining processes, improving client communication, and ensuring that firms can manage the complexities of this wealth transfer efficiently and effectively.
