At Taylor Financial Group, we have prioritized financial planning as a bedrock service and made it a key deliverable to our clients. Over the years, we have built a solid tech stack that addresses various key financial planning areas such as retirement/cash flow planning, tax planning, insurance planning and distribution planning.
The last critical planning area that has only just started to receive attention in the fintech space is estate planning. The reason for this is that it is such a complex, niche area, and many advisors and developers are afraid to go near it (understandably so). However, we have seen some recent developments in this area and it may be time for you to revisit estate planning in your practice.
Here we consider four tech tools that may prove valuable in helping you with your estate plan review process.
1. MGP Legacy Studios
Within MoneyGuidePro, you are able to add on the Wealth Studios package, which provides three additional modules: Income Studio, Lifestyle Studio and Legacy Studio. These modules were created to address some of the areas that MoneyGuide has historically been weak in, such as estate planning; this is where Legacy Studio comes in.
Legacy Studio helps to simplify the complexity of estate techniques and provide clients with the knowledge needed for them to actively participate in their own legacy planning. The Family Tree View overlays the flow of assets between heirs and entities at death (see Figure 1).
Figure 1: Sample of MoneyGuidePro Legacy Studio Family Tree View
Source: Taylor Financial Group
The software is especially useful when discussing the potential implementation of advanced estate planning techniques such as ILITs, CLTs, CRTs, GRATs, IDGTs and illustrating how they may help to reduce future estate taxes. Figure 2 shows how you can add different estate planning strategies to the plan.
Figure 2: Adding Estate Planning Strategies in MoneyGuidePro Legacy Studio
Source: Taylor Financial Group
Pros & cons
MoneyGuidePro has done a great job building out Legacy Studio to provide you with a flow chart, waterfall of assets, and the ability to run strategy scenarios which we believe is key. Being that Wealth Studios can be added on to the MoneyGuidePro or Elite package, the feature is a steal. However, all of the information such as family members and asset beneficiaries must be input manually so this can take some time. In addition, there is the added liability of potentially reading the estate planning documents improperly and passing incorrect information to the client.
If you want to map out a waterfall or provide a visual to clients, the MoneyGuidePro Wealth Studios add-on can provide you with just that (and a bigger win if you already use MoneyGuidePro as your main financial planning software)! But again, remember, you are taking on the liability when doing this work.
2. Vanilla
Vanilla is an online estate planning service that allows clients to upload documents such as the last will and testament, power of attorney, health care directive, asset transfer letter and trust certification. Within 10 days, a licensed attorney will review the documents and provide the client with visual flow charts, fiduciary information, document summaries, asset waterfalls and reminders to keep their plan updated.
The Estate Overview dashboard, shown in Figure 3, shows total family wealth with a breakdown of the estate, asset type and projected estate taxes.
Figure 3: Vanilla Estate Overview Dashboard
Source: Taylor Financial Group
The software also provides a Family Tree outline, shown in Figure 4, so you can review all potential beneficiaries of the estate.
Figure 4: Vanilla Family Tree Outline
Source: Taylor Financial Group
Once all assets and beneficiaries are inputted, the software also provides an asset waterfall that illustrates how assets are to be distributed at the time of death of the first spouse and second spouse (see example below).
Figure 5: Vanilla Asset Waterfall
Source: Taylor Financial Group
Coming Soon
The software will also allow you to model specific estate strategies and understand how the strategies would impact the client’s tax liability. Vanilla is also currently developing a fully digital document creation process for clients that require new estate planning documents.
Pros & cons
We are very interested in Vanilla as they have added many new features to the platform to help give your client a full picture of their net worth and key beneficiaries of assets upon death. The program is interactive and real attorneys can assist in the review of the estate planning documents making the results more reliable.
However, it is important to note that an attorney review can take up to 10 days to be completed. In addition, the software is expensive; it will cost a minimum of $5,000 ($500 per household with a 10-household package minimum) for the basic annual subscription. On top of this, an attorney review will cost $150 per document.
Overall, this program allows you to deliver scalable, replicable value and ensure a consistent estate planning experience across your firm (if you are OK with the cost). It also allows for a review of the estate plans by an attorney and presentation in a very client-friendly and interactive manner.
3. FP Alpha
FP Alpha is an AI-driven comprehensive wealth management solution that helps advisors provide actionable and personalized recommendations to clients in a scalable, intelligent and cost-efficient manner. FP Alpha offers about 16 planning areas, four of which allow for document upload: tax; estate, including wills, power of attorneys, and trusts; home insurance; and auto insurance.
They have recently released their Estate Snapshot, which summarizes the client’s estate, current view of assets flows and key parties. We have provided a few screenshots from a sample estate snapshot below where you see the key provisions pulled from each document and the flow of assets to beneficiaries.
Figure 6: Screenshots From FP Alpha Estate Snapshot
Source: Taylor Financial Group
In addition, the Estate Planning Lab allows you to run scenarios in the software to illustrate how certain trusts or other estate planning strategies could affect estate taxes (or increase assets left to beneficiaries). See an example in Figure 7 below.
Figure 7: Sample Strategies in FP Alpha Estate Planning Lab
Source: Taylor Financial Group
Pros & cons
FP Alpha has built out its estate planning module significantly in the past year. To our knowledge, it is the only software available currently that uses artificial intelligence (AI) to read estate planning documents to provide rapid results. The Estate Snapshot is typically produced within one business day after submission and costs $50 per household (much faster and cheaper than Vanilla).
However, consider that with AI, there is always room for error in reading estate planning documents which are complex and can vary drastically. In addition, we have noticed a lot of generic recommendations/observations (see Figure 8) produced in the software that do not provide a lot of value to the client.
Figure 8: FP Alpha Can Produce Generic Recommendations
Source: Taylor Financial Group
FP Alpha’s offerings could help you provide a basic analysis of the flow of assets and the key provisions in the documents. It can also provide more basic estate planning recommendations (which has been a huge gap for advisors in the financial planning space for some time) and help you work together with estate planning attorneys by laying a solid foundation.
4. RightCapital
RightCapital is a popular platform that many advisors have adopted as their primary comprehensive financial planning software. In addition, the software has embraced estate planning by providing visuals that show the advisor and client exactly what they have for assets and where those assets will go in the event of their passing. Figure 9 below shows you what that looks like.
Figure 9: RightCapital Estate Planning Visuals
Source: Taylor Financial Group
The estate flow chart is a key visual in the analysis of client assets. Note that there are assets held directly by the estate and others that are outside of it. Assets owned by the estate generally pass directly to heirs, but they are subject to estate taxes. The trust funds in the “out of estate” column may offer some tax relief, depending on how they’re set up.
With this, clients want to know what their tax liability will be, how much estate fees and funeral expenses will cost, and how inflation and market volatility will affect those numbers over time.
Figure 10: RightCapital Scenario Showing Estate With and Without a Credit Shelter Trust
Source: Taylor Financial Group
The graphic above shows the difference between an estate without a Credit Shelter Trust (CST) and a proposal where one is included. Note the significant change in the tax liability (projected tax and fee savings of $904,323 with the CST implemented). This is only one of several trust fund strategies you can propose in RightCapital. Others include:
- Charitable Remainder Trust (CRT)
- Charitable Leads Trust (CLT)
- Irrevocable Life Insurance Trust (ILIT)
- Spousal Lifetime Access Trust (SLAT)
- Qualified Personal Residence Trust (QPRT)
- Grantor Retained Annuity Trust (GRAT)
- Intentionally Defective Grantor Trust (IDGT)
- Irrevocable Grantor Trust
Pros & cons
As an added feature to the RightCapital software, their estate planning tool is close in line with that of its competitor MoneyGuidePro in that it provides a flow chart, a waterfall of assets and the ability to run scenarios comparing different estate planning techniques. Having a tool like this within your main financial planning software is a huge win. However, as with MoneyGuidePro, you still must manually input a lot of data and full liability falls on your firm when you take on the role of reviewing estate planning documents in-house.
Per the above, RightCapital is clearly expanding its features to stay competitive and the estate planning tool may be something to consider (especially if you are already using the software for financial planning).
The tools above can help to systemize your estate planning processes and improve your ability to analyze, strategize and make informed, data-driven estate planning decisions. By working with clients on their estate planning, you will be providing tremendous value. This guidance will likely provide peace of mind, something your clients will always remember you for.