Page 26 - Investment Advisor - December 2023

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Similar arguments will be raised in the laws governing retirement invest- period of a rollover,” Harris explained.
potential lawsuits, “which is basically ment advice to be more consistent with “So, you have saved for your whole life
focused on exits from retirement advi- the landscape today, to be more consis- in a 401(k), maybe you’re at one job,
sors from the market, potentially leaving tent with a retirement landscape where maybe many. But let’s say that you’re at
low- and middle-income savers with no people have to make their own individual the end of your career and you’re mak-
advice,” Harris continued. “Now, if that decisions and are turning to advisors for ing a decision about what to do with
happens, I think it’s a legitimate com- advice,” Harris stated. “This is something your accumulated retirement savings.
plaint. I just don’t think [it] will happen.” that people didn’t have to do 50 years ago And you go to a retirement advisor and
The new fiduciary rule is “less broad” when [the Employee Retirement Income you’re saying, ‘[L]ook, I want to put this
than the 2016 rule, Harris relayed. Security Act] ERISA was passed.” in some type of product.’”
The 2016 rule “effectively applied to Today, “401(k)-like accounts are man- Under the current regulations, “if
any time anyone was providing retire- aged by the worker, or the saver, or the you’re just going in for one-time advice,
ment advice to savers. It was incredibly individual, which requires a fair amount that might not be covered under this
broad and it was ultimately any con- of knowledge in terms of how to invest umbrella rule that demands you get a
versation that you had with an advisor and financial decisions that need to be certain level of advice,” Harris continued.
would be covered,” Harris continued. made. And so, when that type of onus is “And what this [rule] does is it says that
The new rule “is much more narrowly put on the saver, you know, a lot of times if the advisor provides regular advice, not
targeted to certain products and target- people are not experts in this field, so just to you, but as part of their course of
ed towards that one-off type of advice they turn to experts,” Harris said. business, then they might be subject to a
you might receive around the rollover A “big” change with the new rule, fiduciary standard. So, what it ultimately
instance. So it’s more narrow.” Harris said, “is around one-time advice.” does is protect people who are looking
What the new rule “ultimately is Prior to the new DOL fiduciary rule, for that, you know, one-time piece of
doing from a very high level is updating “a person might go to an advisor at the advice from an advisor around rollovers.”

RETIREMENT PLANNING

Getting ready for the Big Cut in the “The estate tax exemption has effec-
estate tax exemption tively never been lowered,” he explains,
“but in my opinion that outcome seems
increasingly likely, and it’s going to have
The historically generous joined FTI as trust counsel a big impact on clients when it happens.”
estate tax exemption estab- in its Radnor, Pennsylvania, Critically, the increase in the exclu-
lished by the 2017 tax over- office, following a long- sion only applies to estates of decedents
haul is on track to sunset at term stint at Wells Fargo, dying after Dec. 31, 2017, and before Jan.
the end of 2025. Under the where he worked in both the 1, 2026, and to gifts made during that
law, the exclusion amount wealth and investment man- period. As noted, this provision sunsets
for estate, gift and genera- agement divisions as well as in 2026, meaning the exclusion will go
tion-skipping transfer tax purposes was in the firm’s private bank.) back to $5 million per person, indexed
increased from $5 million to $10 million. As Small points out, the estate tax for cost of living.
For people who have died in 2023, the exemption has only been lowered once According to Small and others, it is
exemption was nearly $13 million. For a in recent history — back in 2010, when hard to overstate the importance of the
married couple, that comes to a combined both the estate tax and exemption were 2026 sunset provisions when it comes to
exemption of a bit less than $26 million. effectively eliminated for one year due achieving optimal estate planning out-
There could be a hugely disruptive to a quirk in prior legislation from comes for clients. Put simply, clients have
effect on wealthy Americans’ legacy giv- 2001. Despite that fact, Small says, a only a little more than two years to take
ing plans due to this sunset provision, big reduction in the exemption seems advantage of the doubled exemption.
explains Fiduciary Trust International’s increasingly likely, given the significant Crucially, a client doesn’t need to die
Scott Small, but advisors can prepare divisions in Congress and the “simple to take advantage of the historically gen-
clients for this change. (Small recently power of inertia.” erous exemptions. Rather, they simply

24 Investment AdvIsor December 2023 | ThinkAdvisor.com