The Law Offices of Brenton C. McWilliams can help high net worth families explore estate planning strategies tailored to safeguarding your wealth and legacy. With greater assets comes greater complexity in how to effectively transfer wealth to future generations while minimizing taxes and maintaining control.
Here are nine important considerations and tools for high net worth estate planning:
1. Establish a Revocable Living Trust
A revocable living trust allows you to transfer assets into a trust during your lifetime. You can serve as the initial trustee, maintain control over the assets, and designate successor trustees to manage the trust if you become incapacitated or pass away. A properly funded living trust can help your estate avoid probate, saving time and maintaining privacy.
2. Consider an Irrevocable Life Insurance Trust (ILIT)
For estates that may be subject to estate taxes, an ILIT can remove life insurance proceeds from your taxable estate. By transferring ownership of life insurance policies to the ILIT, the death benefit can provide liquidity to pay estate taxes without increasing the value of your estate. The ILIT can also safeguard the proceeds for your beneficiaries.
3. Utilize Annual Gift Tax Exclusions
In 2024, you can give up to $18,000 per recipient per year without incurring gift taxes. If you’re married, you and your spouse can each make $18,000 in gifts, for a total of $36,000 per recipient annually. Making annual exclusion gifts can reduce your taxable estate over time. You may gift money, securities, real estate, business interests, and more.
4. Establish a Family Limited Partnership (FLP) or LLC
Transferring ownership of assets like a business or real estate into an FLP or LLC allows you to retain control while transferring wealth to younger generations. By gifting interests in the FLP/LLC to your beneficiaries over time, you can reduce your taxable estate while maintaining the management of the underlying assets. Valuation discounts may also apply to these transfers.
5. Create Trusts for Children and Grandchildren
Trusts provide a structured way to transfer assets to your descendants according to your wishes. You can specify how and when beneficiaries receive distributions, ensuring assets are used responsibly. Trusts can also safeguard inheritances from beneficiaries’ creditors, legal judgments, and divorce settlements. Options include generation-skipping trusts, minors’ trusts, spendthrift trusts, and incentive trusts.
6. Incorporate Charitable Giving Strategies
Philanthropy can play a key role in estate planning for high net worth families. Charitable remainder trusts allow you to generate income, claim a current tax deduction, and benefit a charity. Charitable lead trusts provide an income stream to charities of your choice for a set term before transferring the remaining assets to your beneficiaries. Private foundations and donor-advised funds are other charitable giving vehicles to consider.
7. Plan for Business Succession
If you own a family business, having a well-conceived succession plan is essential. Buy-sell agreements, gifting shares to younger generations, establishing a grantor retained annuity trust (GRAT), and creating a business continuity plan can all be important components. The goal is to ensure a smooth transition of ownership and management while minimizing taxes.
8. Review Beneficiary Designations and Asset Titling
It’s vital to regularly review beneficiary designations on retirement accounts, insurance policies, and annuities to ensure they align with your overall estate plan. Also consider how your other assets, like bank accounts and real estate, are titled. Proper use of joint ownership, transfer-on-death designations, and titling assets into trusts can be important estate planning tools.
9. Engage in Open Family Dialogue and Education
High net worth estate planning is not just about preserving assets. It’s also about imparting values and preparing heirs to be good stewards of the family’s legacy. Engage your family in open discussions about your estate plan and your wishes for the future. Provide financial education for younger generations. Consider holding regular family meetings to maintain transparency and build family unity around common goals.
At the Law Offices of Brenton C. McWilliams, we facilitate these important conversations and walk alongside you at every step. Our role is to listen to your family’s unique needs and craft a personalized estate plan that brings you confidence and peace of mind.
Please call our law firm today to schedule a conversation about safeguarding and transferring your family wealth. Together, we can create a lasting legacy that reflects your values.