Prompted by fast-changing laws, values and demographics, Northern Trust has updated and released a new edition of its primer on estate planning, Legacy: Conversations About Wealth Transfer.

The 2010 Tax Relief Act, which allows a lifetime gift and estate tax exemption of $5 million per person (up from $1 million) until the end of next year, has had the greatest immediate impact on wealth transfer planning for Northern’s clients, said Marguerite Griffin, a senior vice president and national director of philanthropic services for the firm.

Lifetime gifting strategies are being re-considered or examined for the first time as a result of the new law, Griffin said. “Many of our clients have wealth that exceeds the exemption, and already have complex transfer plans in place,” she said. “But for clients who are newer to wealth, they now have a reason to have a plan in place.”

The new edition of the book also addresses the fact that “who is walking in the door” for advice from Northern Trust is changing, according to Griffin. Consequently, the needs of unmarried couples and same-sex couples have become more important, and the book devotes an entire chapter to wealth transfer strategies for the LGBT (lesbian/gay/bisexual/transgender) community.

Same-sex considerations

Same-sex couples shouldn’t make lifetime transfers without considering the gift tax implications, the book advises. For example, a spur-of-the-moment transfer of title to a partner for a house, car or investment account may needlessly diminish the amount of exemption available to shield future transfers.

Strategies such as family limited partnerships, qualified personal residence trusts and grantor retained annuity trusts are critical, the book points out, for LGBT couples not eligible for the unlimited gift and estate tax marital deductions.

“Clients need to understand what wealth transfer documents are necessary to navigate through state and federal laws,” Griffin said. “Strategies that are available to heterosexual married couples may not apply to LGBT couples.”

The good news, however, is that as more states like New York legalize gay marriage, same-sex couples “may be able to provide for partners in ways they couldn’t before,” Griffin said.

New laws also mean new possibilities and new questions. For example, same-sex couples need to explore how they can transfer ownership of an asset to their partner at the time of death. “One question they may ask is if joint ownership with the right of survivorship is the best solution,” Griffin said.

Changing values of parents

“Legacy” also reflects the changing values of parents, who are increasingly concerned about protecting their children “from too much wealth,” according to Griffin.

Whereas fifty years ago “children had no input,” she noted, parents now want their children involved in charitable giving. “They’re willing to set aside assets in charitable vehicles versus waiting until they die. It’s important for their children to share in the charitable legacy.”

Because wealth is now seen as an expression of family values, Griffin said, it’s critical for wealth managers to facilitate helping wealthy families achieve their long-term goals by helping them craft a mission statement and work on family governance, succession planning and effective grant-making and gift-giving.

And just as changing times required a new edition of Legacy, wealth managers also “need to be a bit more nimble in a changing tax and economic landscape,” Griffin said. “There needs to be a heightened level of awareness, a need to plan more often and need to frequently check and see if the plans are consistent with what clients want to accomplish.”