A trend known as "gray divorce," the increasing rate of divorce for those over 50 years old, along with prolonged life expectancy and rising healthcare costs, are impacting financial planning, specifically estate planning.
A recent survey conducted by TD Wealth at the 54th Annual Heckerling Institute on Estate Planning found that 40% of respondents, comprised of estate planners and attorneys, said that gray divorce is causing a rise in family conflict, already a significant challenge within estate planning.
"In addition to prolonged life expectancy and rising healthcare costs, this upward trend around couples divorcing over the age of 50 has created a recent swirl among the estate planning industry," says Ray Radigan, Head of Private Trust at TD Wealth. "Gray divorce is adding another layer of complexity to the estate planning process that already arises with blended families, designation of heirs and the everchanging domestic structures. As a result, it's more important than ever to proactively review and discuss the estate plans with our clients and their families on an ongoing basis."
Furthermore, 39% of survey respondents identified retirement planning and funding as a highly impacted factor of estate planning for those divorcing over the age of 50. Gray divorce is also having an impact on determining who will be responsible for enacting power of attorney (7%), determining appropriate social security benefits (6%), and drafting of a will (5%).
In addition to the impact of gray divorce, the TD Wealth survey also explored the more traditional causes of family conflict when engaging in estate planning and found that not communicating the estate plan with family members is the most common cause of conflict (43%), followed by dealing with blended families (29%). Only 13% of respondents cited designation of beneficiaries as a cause for conflict in 2020, compared to 30% in 2019.
"There are a number of external influences that we must keep in mind to ensure effective estate plans," Radigan adds. "While the purpose of estate planning is concrete, the factors and threats involved are far from it. The goal for any estate planner should be to effectively cut through the noise and distractions to build stable plans with our clients and their loved ones."
Tax Reform and Rising Healthcare Costs Join Family Conflict as 2020 Threats to Estate Planning:
For two consecutive years (2018 and 2019), family conflict was identified as the leading threat to estate planning, however, 2020 proved to be a different story. This year's survey revealed that estate planners are split among multiple concerns that include: family conflict (25%); tax reform (25%); prolonged life expectancy and increased healthcare costs (25%), respectively.
As the Tax Cuts and Jobs Act continues to have a real wide-spread effect on estates and trusts, estate planners are reconsidering the implementation of traditional strategies to work with the exemption, rather
than treat it as an obstacle. Thirty-nine percent (39%) of respondents suggest to clients to gift now when exemption is high. However, 23% of respondents suggest advising clients to consider trusts to protect assets from future claims, and 20% suggest planning to minimize future capital gains tax consequences.
This article originally appeared on Yahoo! Finance.
