Has the stock market crash of 2008 and subsequent great recession affected your estate planning practice? In October 2008, my law firm celebrated the highest grossing month in our firm history, up 70% from January 2008. In November, we did one-half of what we did in October. Unfortunately, when the revenues fell in half, my overhead and expenses did not. I had to make significant adjustments quickly.
As I sit here, a year and a half later, it’s amazing how once again the old adage that “it all works out in the end” has once again prevailed. My law firm is now leaner and generates between 60 and 70 percent of the revenue we were able to do at the peak but with only 50 percent of the overhead, thus a more profitable model. What saved us? Actually, when the market tanked, all estate planning business ceased. Nobody was banging down our doors to avoid probate, but the doorbell continued to ring to help those people concerned with losing a lifetime of assets to the nursing home and wanting to qualify for Medicaid. Interestingly enough, through this economy we have found a whole new client market, those wanting a new type of “asset protection”.
As an estate planning Attorney, when you hear “asset protection” you tend to think of the sophisticated asset protection strategies to avoid estate taxes or the asset protection trusts domiciled in Alaska or one of the other 11 states that permit the wealthy to create irrevocable trusts and still retain some rights from them. This is NOT the asset protection planning clients are hiring me for.
Asset protection for non taxable estates has emerged as a whole new desire of the consumer market. The significance of these trusts is they do not have the restrictions of the traditional asset protection trusts that must comply with estate tax laws or the laws of the 12 states; they rely on common law and trust law. Statistics show only 3 out of 1,000 Americans have a taxable estate of $3.5 million dollars, thus representing 0.3 percent of the population, leaving 99.7 percent who don’t care about estate taxes.
Unfortunately, the legal industry has not caught up with this phenomenon, but MPS attorneys across the county have. What we are finding is clients are hiring us on a 10 to 1 ratio asset protection planning over traditional estate planning. We have also found that there’s a whole new fear of clients that didn’t exist before. When we ask clients what they want, they tell us to protect our assets but we don’t end there, we ask “protect from whom or what?” The No. 1 answer, they want protection from is the nursing homes. That did not surprise us, but what shocked us was the No.2 response, they want protection from the government! I began this blog with talking about the demand for Medicaid planning even during this down economy, which remains high. Since then I have also discovered, what I believe to be the next generation of estate planning, asset protection for non taxable estates, which provides asset protection while Medicaid compliant and permits the grantor full control of their assets and full use, but no access. Not only are clients loving the protection, they especially appreciate the “tax neutral” status they hold so no special tas reporting is required. Business owners and professionals are among the clientele hiring me for these trusts. Clients’ new fear of our government has created this new opportunity. I make no representation of what side of the isle you fall, Republican or Democrat, Liberal or Conservative, I am merely sharing feedback I am seeing day-to-day from everyday Americans. If you are not providing this new form of asset protection, I encourage you to get up to speed on it quickly. Clients need it, and more importantly, they are writing checks for it, even in this economy.
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