RightCapital's Estate Planning module, located within the Estate > Analysis tab of each client plan, provides insight into what is projected to happen to a client's assets after they pass away. Here, you can visualize how assets will flow to a surviving spouse, and eventually to the client's heirs, in a dynamic environment. Using the Action Items, you can even fine-tune the details of the estate analysis, and propose trust strategies to help strengthen a client's financial goals:
By default, there are three tabs located within the Estate Analysis: Flow, Comparison, and Details. A fourth tab, Trust, will appear if there are any irrevocable trusts entered within the plan. All four tabs are covered here; let's dive in!
Before we get started, an important note...
The values that flow into the Estate Analysis will be based on the original Proposed Plan in the Retirement Analysis module. Any changes made to the proposed plan within the Action Items will impact the Estate Analysis.
Estate Flow Chart
The Flow tab provides comprehensive modeling tools and an accessible visualization of assets flowing from the client to their heirs. This powerful visual tool allows clients to see with clarity through the sometimes murky waters of estate planning — continuing to elevate your services as a critical component to your client's financial success.
The chart flows from top to bottom, with the left side displaying the client's taxable estate, and the right side highlighting any assets held outside of the taxable estate. Within joint plans, the client who passes away first within the projections will be listed at the top:
What determines who passes away first?
Each client's planning horizon, entered within the Profile > Family section, determines their assumed age of death within the projections. If both clients have the same planning horizon, the older client will pass away first. Within the Action Items, you can manipulate each client's planning horizon to see the impact of clients passing away at different times.
Within the flow chart, certain tiles will hop as you hover your mouse over them. This indicates that you can click into those tiles to see expanded data. In this way, you can glean greater insight into the assets that make up a client's estate, the expected taxes and fees that will reduce their estate upon passing, and more.
Pro-Tip: Estate Tax
RightCapital will automatically calculate federal estate tax if the gross estate exceeds the exemption threshold for the Tax Law you are using within the plan. Under TCJA, the 2024 exemption is $13,610,000 (today's dollars). Under 2017 tax law, the exemption is $6,940,000 (today's dollars).
State-level estate taxes may also be calculated based on state-specific rules. This will be based on the resident state at the end of the Proposed Plan (including any Primary Home Relocations). RightCapital will also capture any tax that may be due to other states for real estate held there (vacation or rental properties).
Click into the 'Taxes and Fees' tiles to view any projected estate taxes. Both federal and state-level estate exemption thresholds will be projected out into the future using your Tax Inflation rate. This setting can be adjusted at the client level within the Gear Icon > Settings > Other Assumptions tab.
By default in RightCapital, the first client to pass away will leave 100% of their assets to the surviving client. However, you can adjust this within the Account Assumptions, located within the Gear Icon > Settings tab of the plan. Assets that are not left to the co-client will be moved to the 'Estate to Heirs' tile to the right of the first client's estate, rather than being passed down to the surviving client:
Action Items
The Action Items beneath the flow chart allow you to fine-tune the details of a client's estate analysis. Here, you can update variables like funeral and probate expenses, play around with the impact of different planning horizons, and even propose trust strategies. The Action Items are divided into two columns: Basic Information on the left, and Trust Strategy on the right.
Basic Information
As a starting point, you will see the following items listed under Basic Information:
- Client & Co-Client's Planning Horizon: The assumed age of death for each client. You can adjust the planning horizons to illustrate what changes will occur in the estate analysis if clients were to pass away at different times. Do note that changing the planning horizons within the Estate Analysis will not impact any other modules in RightCapital.
- Funeral Expense: Funeral expenses will be automatically added to the 'Taxes and Fees' tiles within the analysis flow chart, reducing a client's estate before it is passed on. Funeral expenses should be entered in today's dollars; your General Inflation rate will be used to project this value in future dollars.
- Probate Expense: Probate expenses will be automatically added to the 'Taxes and Fees' tiles within the analysis flow chart, reducing a client's estate before it is passed on. Probate expenses are entered as a percentage of the gross estate, excluding qualified accounts (see below).
Pro-Tip: Probate Expenses
RightCapital makes the assumption that qualified accounts such as 401(k)s and IRAs have beneficiaries assigned and will not go through probate. As such, qualified accounts are excluded from the probate expense calculation. Jointly owned assets (properties, business, lifestyle assets, etc.) are also excluded from probate upon first death.
In addition to the items above, you can also click the Edit button in the lower right of the Action Items to include several other items. These items include Cumulative gift, Gift tax paid, and DSUE amount:
- Cumulative Gift: Generally, no estate taxes are due if the estate value is less than the lifetime gift/estate exemption. However, that exemption may be reduced throughout the client's life if they make gifts that exceed an annual gift exclusion ($18,000 in 2024). If a client has made gifts in excess of the annual exclusion, the total value can be entered in the cumulative gift field. The value entered in this field will reduce the gift/estate exemption threshold for that client.
- Gift Tax Paid: This field addresses a scenario where clients make gifts in excess of the annual gift exclusion, but choose to pay the taxes in the year that the gift is made. The estate tax calculated will be reduced by the total dollar amount that you enter here.
- DSUE Amount: Allows you to include any deceased spousal unused exclusion (DSUE) a client may have from a previous marriage. The value entered in this field will increase the gift/estate exemption threshold for that client.
Pro-Tip: State-Level DSUE
Only two states, Hawaii and Maryland, allow for the portability of any unused exclusion between spouses. All other states do not.
Trust Strategy
In addition to the Basic Information items described above, you can also use the Action Items to propose Trust Strategies. By adding a trust strategy, you can illustrate a scenario in which assets are moved from the client's taxable investments into a trust type of your choosing. Once added, the estate flow chart will update to reflect the impact of your trust strategy.
Use the steps below to add a trust strategy. Do note that you are not limited to a single trust, you can add multiple trust proposals to the trust strategy area to see the combined impact.
1
Click the Edit button in the lower right corner of the Action Items:
2
Within the drawer that opens on the right side of your screen, click Add New Trust in the lower left to open the menu of available trust options:
3
Choose your desired trust type, and then use the data fields to identify the parameters for that trust. The available data fields will adapt to fit your chosen trust type.
After filling out each field, click Save in the lower right:
4
After clicking Save, your trust proposal will be added to the Estate Analysis. Use the Action Items to include or exclude the trust proposals you've built here:
Looking for more on trusts?
For more detailed information on each type of trust within RightCapital, please see the article below:
When including a trust strategy, all of the figures within the estate flow chart will be updated to reflect the impact of that trust on the client's estate analysis. This will allow you to see:
How much is held outside of the taxable estate
How much more the client's heirs will receive
How much more will go to charity
How much less the clients will pay in taxes
In addition to the flow chart, the Comparison tab can be used to directly compare the current strategy (without the trust) to the proposed strategy (with the trust). A Trust tab will also appear, allowing you to track the income distributions and year-to-year balances and returns for your proposed trust. Please see below for more details on these tabs.
Comparison
The Comparison tab provides you with intuitive visuals clearly illustrating the benefits of your proposed trust strategy. There are two charts available here- the Estate Planning Summary chart, and the Retirement Income chart. These charts can be toggled between using the dropdown arrow to the right of the chart name:
Estate Planning Summary
The Estate planning summary chart compares key metrics between the current strategy (in blue) and your proposed strategy (in green). Here, you can directly compare the total asset value passed to heirs, any amount given to charity, as well as the total taxes and fees. As you continue to make adjustments to the Action Items, these values will update in real time. You can hover your mouse over the bar chart to see specific dollar amounts:
Important Note: Action Items
Making changes to the 'Basic Information' action items will impact both the current and proposed strategies. If there are no proposed trusts included in the analysis, the current and proposed will be the same.
Retirement Income
The Retirement income chart provides a breakdown of the client's various income sources during their retirement years. This will factor in any trust income entered as part of a trust proposal (categorized as Other Income, represented in green). You can hover your mouse over the chart to view specific dollar values, or over the legend beneath the chart to highlight or hide certain income sources:
Pro-Tip: Stable Income Percentage
The Stable income % to the right of the income sources chart represents the percentage of retirement expenses that are covered by income sources other than saving withdrawals. Social Security, Pension, Annuity, and Other Income are all considered stable income sources. Saving Withdrawals (RMDs, manual distributions, and negative net flows) are not considered stable.
Details
The Details tab provides a list of categories that, together, represent the monetary values reflected in the estate flow chart. This page provides the information in a more traditional table reminiscent of a balance sheet, as opposed to the flow chart's dynamic presentation:
Just like the flow chart, the values on this page will update as you make adjustments within the Action Items. In joint plans, the first client to pass away will be listed on the left, the second client to pass will be listed in the center, and assets held outside of the estate will be listed to the right.
Trust
The Trust tab allows you to see the annual cash flow breakdown for all irrevocable trusts entered into the financial plan. This includes existing trusts entered into the Net Worth section of the Profile, as well as proposed trusts entered via the Estate analysis. Do note that if there are no irrevocable trusts within the plan, this tab will not appear:
You can use this tab to discuss annual trust balances, returns, taxes, fees, and distributions. In plans with multiple trusts, you can use the dropdown menu in the upper right to choose which trust you'd like to view. You can also click the blue Download button in the upper right corner to export these cash flow tables as .csv files. These can then be opened in Microsoft Excel, Apple Numbers, or any other spreadsheet software.
