Greater Need for Both Tax and Legacy Planning Drives Increasing Use of Trusts by RIAs and Fee-Based AdvisorsJefferson National’s Latest Survey Shows Majority of RIAs and Fee-Based Advisors are Underutilizing the Tax Advantages of Investment-Only Variable Annuities When Funding Trusts
Louisville, Ky. — April 20, 2015 — Roughly half of Registered Investment Advisors (RIAs) and fee-based advisors have increased their use of trusts in recent years, according to a survey by Jefferson National, recognized innovator of a leading tax-advantaged investing platform for RIAs, fee-based advisors and the clients they serve. While legacy planning has traditionally been the primary factor driving the use of most trusts, advisors say that tax planning is now growing in importance. Eighty percent of RIAs and fee-based advisors cite the importance of using trusts to mitigate the impact of taxes for some of their clients. More than two-thirds (69 percent) of RIAs and fee-based advisors say they plan to increase their use of trusts over the next five years, with 70 percent of them saying this increase is because trusts are an effective solution for both tax planning and legacy planning.
The Jefferson National survey further revealed that RIAs and fee-based advisors recognize the benefits of using a tax-deferred vehicle for funding many types of trusts, to help increase accumulation and to control the timing and distribution of income, yet nearly two-thirds (65 percent) do not use tax-deferred variable annuities (VAs) to fund trusts. The most commonly cited reasons are too many fees (44 percent), not enough fund choices (15 percent), and advisors believe that variable annuities do not work with the types of trusts they use (15.5 percent).
“This survey revealed that when funding trusts, most RIAs and fee-based advisors are underutilizing variable annuities because of cost, complexity and limited fund choices,” said Laurence Greenberg, President, Jefferson National. “Today there is a new category of low-cost, no-load Investment Only VAs (IOVAs) that eliminates all of these barriers, making IOVAs an effective vehicle for use with many types of trusts. By providing more education about the benefits of IOVAs, we can help change perceptions and increase adoption—to help advisors, their clients and their heirs build more wealth.”
Other findings of this survey include:
- The trusts most frequently used by RIAs and fee-based advisors are revocable trusts (80 percent) and irrevocable trusts (56 percent).
- One-third of RIAs and fee-based advisors are currently using VAs to fund trusts, with 72 percent of them saying the primary benefits of using VAs are tax deferred growth and controlled timing and distribution of income.
- 54 percent say that trusts are their primary strategy used for wealth transfer, citing the following benefits: to control the distribution of assets (81 percent), avoid or minimize probate (70 percent), protect assets from creditors (49 percent), and minimize taxes (44 percent).
- 90 percent say estate and legacy planning is important to their current clients, citing the following benefits: to provide for financial needs of a spouse or family members (74 percent), control the distribution of assets (73 percent), minimize taxes (66 percent), and avoid or minimize probate (65 percent).
Financial professionals can download complete survey results and educational content about using IOVAs to fund trusts by visiting Jefferson National’s online Knowledge Bank at: https://www.jeffnat.com/knowledge-bank/
About this survey
More than 350 responses from participating advisors were collected online between March 15 and April 2 of 2015 as part of Jefferson National’s series of ongoing surveys addressing the issues that RIAs and fee-based advisors care about the most. The margin of error in this survey was +/-5%.