Estate planning has undergone radical changes, and advisers need to keep pace. The role of protecting, never mind growing, wealth in the coming 12 months will involve more services and strategies than just tax planning.

As we enter the new year, we’re all living with the estate tax in limbo, while Congress ponders next steps. Both the estate tax and the generation-skipping transfer tax (on assets given to grandchildren) were repealed at the end of 2009, and the gift tax rate was reduced from 45 per cent to 35 per cent.

Most estate planners expect Congress to restore the taxes retroactively, and to put back in place the system that applied in 2009: a $3.5 million exemption for estate tax and generation-skipping transfer tax, with a 45 per cent rate for these two taxes as well as the gift tax.   

Meanwhile, the economic crisis that began in 2008 lowered many people’s net worth. This, together with an exemption amount that is almost certain to stay high, radically alters the estate planning landscape.

Even once the tax is restored, with very little effort it will generally be possible to structure estate plans so that taxes will not be an issue. Advisors who work in this field must adapt their services to address the new realities.

Clients will have less need for sophisticated tax saving techniques with high transaction costs. People on the cusp of being subject to estate tax can shed their wealth with much simpler tools – for example, by converting a traditional individual retirement account to a Roth IRA, paying directly for health and tuition expenses, and making gifts that come within the $13,000 annual gift tax exclusion. All these tools can be used to benefit loved ones, whether or not they are relatives.

Demographics play a role too. As the baby boomers reach the prime age for estate planning, psychodynamics will be just as important at this stage of their lives as they have been earlier. One of the key issues they will grapple with is how to divide the pie between various family members, especially children.

Tempting as it may be to tailor a plan to the personalities, abilities and needs of individual family members, disparate treatment, particularly of children, can rekindle old rivalries or ignite new ones. Treating all children equally improves the chances that they will peacefully coexist.

That said, when planning it is reasonable to take note of children’s career decisions, choice of a spouse and all the unforeseeable events that a parent witnesses in a child’s life. Baby boomers will be introspective about these issues, just as they have been with many aspects of raising their children. Along the way, they may expect empathy and guidance from their advisors.

Trusts will continue to be an important estate planning tool, but not necessarily for tax saving. Instead, the focus may shift to other crucial purposes that trusts can serve: to hold money for minors, forestall spendthrift family members, or protect assets from former spouses or creditors, for example.

Advancements in medical science and care may enable us to live fuller, longer lives. But that also means more clients are likely to suffer from a diminished mental state – a harsh reality that’s difficult to accept. It’s not enough for advisors to draft a revocable trust and durable power of attorney. Clients also need help selecting trustworthy people to administer these arrangements. Think Brooke Astor. 

Although the long-term effect of the financial crisis remains unclear, it’s possible that many people, especially the baby boomers and their parents, will need to be more careful about money for the rest of their lives. And now, more than ever, the planning process is not just about money but also about love, family and legacy.

Deborah L Jacobs is a New York-based lawyer and author. Her latest book is “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide” (DJWorking Unlimited, 2009).