Reducing the disparity in will-writing between Black and white households would shrink the racial wealth gap in America, according to a new study.

Eliminating the so-called will gap would cut the stubbornly wide difference in wealth among the two races by “a modest but meaningful” 10% over three generations, according to a working academic paper and research brief released earlier this month by the Center for Retirement Research at Boston College. The paper hasn’t received peer review or approval for publication in an academic journal. The key findings of the research, which was financially supported by Wells Fargo, show the importance of financial advisors’ will and estate-planning services.

“It’s a pretty easy thing to do to write a will — relative to, say, saving a lot more money,” said Gal Wettstein, a senior research economist with the center and one of four co-authors of the report, alongside Jean-Pierre Aubry, Alicia Munnell and Oliver Shih. “We think that it’s a pretty low-hanging fruit in terms of making progress.”

Their conclusions followed another report by the center last year concluding Black and Hispanic Americans “are less likely to get an inheritance, have a will, and plan to leave a bequest” and other research at the intersection of race and wealth. For example, racial differences in retirement savings, homeownership subsidies and tax advantages remain persistent factors.

READ MORE: Starting estate planning conversations — even without tax expertise 

Despite a significant narrowing of the ratio of wealth between white and Black households between 1880 and 1950, it has stayed around 6-to-1 in recent decades amid “evidence that it has been growing wider since the 1980s,” according to the study. Wiping out the wealth gap would take more than three centuries at the current pace, the McKinsey Institute for Black Economic Mobility found in another study earlier this year.

The center’s number-crunching, using data from the University of Michigan Health and Retirement Study, offers another lens of examining that gap. “Even after adjusting for characteristics such as wealth, education, presence of living children, and having received an inheritance in the past,” Black households are 20 percentage points less likely than whites to have a valid will, the study said.

That reflects a juxtaposition in which “many African American households are gaining in income and are very quickly moving into the middle class, upper middle class” yet feel a sense of “intimidation to step into an office, an investment firm’s office, and engage in a conversation of, ‘Hey, I’d like to start investing,'” Association of African American Financial Advisors Chair Alex David, who’s also the division director of the northeast for Raymond James Financial Services, said in an interview last week. The lack of wills stems from “a culmination of a number of socioeconomic factors that go into starting a conversation,” he said.

“Oftentimes they feel comfortable having a conversation with someone that might have experienced the same thing that they have,” David said. “‘I finally am at a place in my life where I can start saving and investing. I want to learn more. I’d like to start investing. Oh, you’re the same way, you’re first generation. Wow, I don’t feel as intimidated. So starting with $25,000, that’s all right.’ Being able to have a comfortable conversation with like-minded and perhaps like-history individuals oftentimes needs to take place.”

Without those conversations, the heirs to a deceased relative who’s bequeathing an asset, such as a home, without a valid will miss out on benefits such as property tax deferrals, an easier sales or insurance process and the ability to “to pass along their assets in a way that preserves their value,” Wettstein said. For most Americans of any background, their home is likely to be their most valuable asset, he noted. 

“Having a will can increase the economic value of the bequest,” he said. “Without a will, houses are passed along to heirs according to whatever the state default rules are, and those generally divide the asset between the heirs.”

READ MORE: What advisors (and their clients) can learn from celebrity estate debacles

To calculate the potential impact of writing a will, Wettstein and the other researchers performed two different simulations “to account for the shortcomings of each of these two ways” of measuring the effect of will-writing “on bequests and of bequests on late life wealth,” he said. Each of the two simulations of a scenario in which Black households had a will at the same rate as those of white ones since 1980 resulted in a 10% reduction in the racial wealth gap. 

“The racial wealth gap has proven to be a persistent problem, and one reason may be that Black decedents have a much lower likelihood of having a will,” the study said. “The robust finding is that such a change would have modestly but meaningfully reduced the wealth gap — by about 10 percent — by the time today’s prime-age workers reach their peak wealth years (ages 60-70) in 2040. While no one change is likely to completely close the racial wealth gap, interventions that increase the will-writing of Black households are one promising avenue for policy exploration.”

While the influx of private equity into the accounting profession has brought much-needed capital and a welcome alternative to firms, it’s definitely not for everyone, say experts.

In fact, the overwhelming majority of accounting firms won’t ever make a PE deal, Allan Koltin of the Koltin Consulting Group told attendees of Accounting Today’s inaugural PE Summit, held this week in Chicago.

“Private equity is not a silver bullet,” he said in his keynote address. “If you don’t do PE, that doesn’t mean you won’t be successful. But you do need to figure out what you’re going to do” to solve the issues of access to capital and resources that PE deals help with.

It’s important that firms can be successful without private equity — because many of them won’t be able to access it.

“Half the firms that want to go with PE can’t,” said Koltin, who is a co-chair of the PE Summit. “If you’re in the bottom half of earnings in accounting, you won’t be a good fit. I get calls from PE firms that want to pull out from a deal because they’ve looked at the firm’s numbers and don’t want to make an offer. ‘We don’t want to insult them.'”

Koltin and a number of other experts at the conference described the “quality of earnings” review that PE firms do as strenuous examination that often happens later in the process than accountants might expect that kind of due diligence to occur — and that can kill a deal.

“It seems like a lot of deals have happened, but believe me, the same number or more have died,” Koltin explained.

What’s more, while most of the earliest deals in the profession seem to have turned out well, that’s no guarantee that will be the case going forward.

“If you hear nothing from me, this is what you need to know: Not every PE deal will be successful,” Koltin warned. “There will be some home runs, and some good ones, and some that just don’t work.”

“There are going to be winners and losers,” agreed Phil Whitman, a co-chair of the event and CEO of Whitman Transition Advisors, in a panel session on the first day of the conference. “I bet there will be more winners than losers, but there are going to be losers, so you have to do due diligence, on both sides of the deal.”

So far, the PE deals are so good

Experts at the PE Summit were quick to point out that none of this should suggest that private equity has not been a net positive for the profession.

“Private equity brought to the landscape a new awareness of the issues that accounting firms are facing, and a sense of urgency started kicking into place,” said Bob Lewis, the third co-chair of the event and president of The Visionary Group.

Added Whitman, “Private equity is the white knight that came riding in to save day. They’ve got a better answer related to talent acquisition; they’ve got a better answer to firms’ succession challenges. We haven’t been able to solve those on our own.”

“PE firms raised the bar on our profession,” according to Koltin. “They’re making it more competitive. They’re making tougher decisions faster. They’re taking the partnership model and making it work better.”

The initial wave of accounting firms to make PE deals, almost by definition, have been those that were a great fit for that type of investment.

“Every single one of the deals that has been done seems to be working,” said Koltin. “If you open up the playbook of EisnerAmper and Citrin Cooperman — it’s been magical. They’ve hit it out of the park.”

That success comes down to matching up the right players on either side of the deal.
“It starts with a great accounting firm — strong leadership, strong organic growth, lots of next-gen talent,” explained Koltin. “And what would I look for in a PE firm? A PE firm that understands the people business. … I want a resource enabler — ‘You were successful before you met us. … We don’t want to get in your way.'”

The Internal Revenue Service said Thursday it would begin accepting electronically filed tax returns that contain dependents who have already been claimed on another taxpayer’s return, as long as the taxpayer on the second return has an Identification Protection Personal Identification Number.

The move would help prevent tax refund delays next tax season, while still protecting taxpayers from identity theft. This change will especially help filers who claim tax credits such as the Earned Income Tax Credit and Child Tax Credit.

Starting in the 2025 filing season, the IRS said it would begin accepting accept Forms 1040, 1040-NR and 1040-SS even if a dependent has already been claimed on a previously filed return as long as the primary taxpayer on the second return includes a valid IP PIN. This change in policy will decrease the amount of time for the IRS to receive the tax return and accelerate the issuance of tax refunds for those with duplicate dependent returns. Up until now, the second tax return had to be filed by paper. 

Andrew Harrer/Bloomberg

The IRS is encouraging taxpayers who plan to file early in 2025 to sign up for an IP PIN before Nov. 23, 2024. After that date, the IP PIN system will be offline for annual maintenance until early January 2025. 

Using an IP PIN enables taxpayers to protect themselves against identity theft. With the latest changes, the IP PIN will also help protect taxpayers when someone fraudulently claims a taxpayer’s dependent. 

Signing up now ensures taxpayers are ready to file electronically at the start of the 2025 tax season with an additional safeguard against identity theft and helps avoid issues involving dependents being claimed on multiple tax returns. 

While the IP PIN system will be down for scheduled maintenance later this month, the IRS reminded taxpayers they can still sign up for an IRS Online Account, which is the first step to get an IP PIN. The account also enables taxpayers to securely access their tax return and account information from previous years, including information from their W-2 and 1099 forms. The IRS has been periodically adding new digital tools and features to the Online Account as part of its transformation work. 

The IRS will continue to reject e-filed returns claiming dependents who appear on a previously filed tax return unless a valid IP PIN is provided. 

When a dependent has already been claimed on another tax return, the IP PIN provides an important new option. The taxpayer listed first on an e-filed tax return claiming dependents can provide their current year IP PIN when they file. If they do, the return will still be accepted. The spouse (if married filing jointly) and the dependents on the tax return don’t need to provide an IP PIN if they don’t have one. 

Taxpayers who don’t have IP PINs will have their e-filed returns rejected if one of their dependents has already been claimed by another taxpayer. However, if the taxpayer gets an IP PIN and e-files again with the IP PIN entered on the return, the IRS will accept the return as long as there are no other issues with it. Taxpayers will also still have the option to paper file returns with duplicate claims for dependents. 

An IP PIN will be required when claiming duplicate dependents or children on Forms 1040, 1040-NR and 1040-SS. It will also be required on Forms 2441, 8863 and Schedule EIC that are attached to Tax Type Form 1040. 

Tax returns claiming duplicate dependents for prior years (tax years 2023 and 2022) still need to be filed by mail if the dependents have been claimed on another return.