Our featured author is Martin M. Shenkman, a respected attorney and tax specialist who practices in New Jersey and New York.
In the linked article, he examines the crucial role played by expected withdrawal rates in the estate planning process. The issue is simple enough in conception but dizzyingly important in execution: making sure clients don’t run out of money in retirement.
There’s a slight caveat to consider: very wealthy clients are perhaps not so vulnerable to a dearth of cash. For them, taking advantage of the temporary benefits contained in the current tax regime, which features an inflated estate tax exemption, is key. Right now, the exemption is $10 million – in 2026, it will drop to $5 million. Wealthy clients should access the exemption as soon as possible, but they must take care, warns Shenkman: sufficient resources need to remain in their hands to fund their retirement at the desired level. Now is a good time to act, but maintain a degree of prudence, he says.
To enjoy the benefits of the current tax regime, your client will need three things: a sound budget plan, a financial plan to support it and a carefully contrived financial forecast.
Mr. Shenkman gives the following example: a client’s estate is worth $20 million and she hopes to spend $400,000/year in retirement. If she transfers $10 million now to lock in the tax benefit, a standard 4% withdrawal rate on the remainder would be sufficient to reach her target. However, if the withdrawal rate in the financial plan were set at 3%, $13.3 million would be needed to support her lifestyle, reducing the amount available for transfer.
For more information, please read:
How Withdrawal Rates Affect Estate Planning | Wealth Management