Anticipating Challenges. Creating Awareness. Building Resilience.

As we begin 2025, market valuations remain strong, and opportunities abound. However, with elevated valuations come risks that advisors must anticipate to guide their clients effectively. The Flight Risk Assessment Tool (FRAT) is designed to help advisors reflect on their client base and evaluate their readiness to address potential vulnerabilities.

Use this tool to rate your preparedness on a scale of 1 to 5 for each question:

• 1 = Not Addressed

• 5 = Fully Addressed

1. Valuation Risk and Tax Impact: Equity, Real Estate, and Business

Question: How prepared are you to address the following with clients?

1. Do you have a plan to help clients navigate the tax implications of a potential liquidity event (business or real estate sale)?

2. Are you prepared to address how elevated valuations might impact your clients’ estate planning goals?

3. Do you routinely review how clients’ growing wealth aligns with market conditions and future risks?

4. Are your clients prepared for the compounding effects of capital gains, income, and estate taxes in a high-valuation environment?

5. Do you have a process in place to evaluate the risks associated with sudden changes in market or real estate valuations?

2. Qualified Retirement Plans: IRA and 401(k) Balances

Question: How well have you addressed the risks of qualified plan balances with your clients?

1. Do your clients understand the IRS’s “silent lien” on qualified retirement plans and its long-term impact?

2. Have you reviewed your clients’ plans to manage the accelerated withdrawal rules under Secure Act 2.0?

3. Do you have a strategy for minimizing estate tax exposure on large retirement account balances?

4. Are your clients aware of potential tax inefficiencies in leaving large IRA or 401(k) balances to heirs?

5. Have you evaluated opportunities to mitigate tax risks on qualified plan balances through coordinated planning?

3. Trust Structures and Estate Planning Success

Question: How prepared are you to help clients manage the complexities of trusts and estate planning?

1. Have you reviewed your clients’ existing trust structures to ensure they align with current financial goals?

2. Are clients aware of the income tax obligations associated with grantor trusts like SLATs or IDGTs?

3. Do you have a plan to address the cash flow impact of clients paying taxes on behalf of their trusts?

4. Are your clients confident their trust strategies will remain effective in a changing tax environment?

5. Have you collaborated with clients’ estate planning attorneys or CPAs to ensure seamless integration of strategies?

How to Use FRAT Results

This assessment is a starting point for reflection, not a comprehensive plan. Your responses can help you identify areas to focus on in 2025 as you guide your clients through the complexities of wealth management.

• Scores of 1-2: Indicates an area that may need more attention and action.

• Scores of 3-4: Shows progress but may benefit from further review.

• Score of 5: Reflects confidence and readiness in addressing client risks.

As we enter 2025, staying ahead of the curve means anticipating challenges and creating clarity for your clients. The FRAT tool is dynamic and will evolve with changing markets, just as your approach should adapt to your clients’ unique needs.

Empower your planning process with clarity and confidence. For more information on implementing the FRAT framework, connect with us today.