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High Net Worth Estate Planning Considerations

Tips for Planning Ahead for Those with Significant Assets
| By: Randall E. White, CFP®, RICP®, CRPC®, CMFC®

High Net Worth Estate Planning Considerations
Wednesday, 07 September 2022

Estate planning can be complex and uncomfortable to navigate on its own, but it can be even more challenging when it comes to high net worth estate planning. Add in the fact that things are constantly changing within the industry, such as tax laws, and it becomes an even more difficult task.

When estate planning, high net worth individuals (HNWIs) typically prioritize minimizing estate taxes, protecting the inheritance they’re leaving, circumventing the probate process, and choosing the right trustee. If you’re a high-net-worth individual and share these priorities, here are some things to keep in mind as you build your estate plans.

Selecting the Right Trustee

Arguably one of the most important steps you must take in high net worth estate planning is selecting the right person to act as the legal owner of your assets. A trustee will be responsible for managing them, filing taxes, and distributing them as necessary. You’ll want to ensure you’re working with a professional trustee who will act in your best interest.

This isn’t a decision to make lightly, so be thoughtful and intentional about your choice. Seek out references and read reviews on everyone you’re considering hiring. Ask lots of questions and be sure that they’re answering them fully, and discuss the entirety of your estate planning goals so you can be certain that you’re both on the same page.


SEE ALSO: 16 Things to Do When Planning Your Estate

Minimizing Estate Taxes

If not considered properly, taxes can eat into a significant amount of the wealth you’re leaving behind for your heirs. That’s why it’s so crucial to keep taxes at the forefront of your mind when planning your estate. That means considering how gift tax, income tax, and generation-skipping tax may come into play. Aside from income tax, the other categories are referred to as wealth transfer taxes, and here’s a brief overview of what you should know about them:

Gift and Estate Taxes

These taxes change annually due to inflation. However, in the aftermath of the Tax Cuts and Jobs Act (TCJUA) passing in 2017, the exemption for these taxes has increased. Currently, the exemption is $12.06 million per individual and $24.12 million for married couples. Anything over this limit will be taxed at 40% of the entire gift value.

You’ll also want to be aware of what’s referred to as an annual exclusion gift, which allows you to gift $16,000 per year, per person with no limit to the number of recipients. For example, if you give someone a gift of $20,000, the first $16,000 of that gift will be exempt, and the rest will be subject to a gift tax.

Generation-Skipping Tax

Any time you give property to a grandchild or great-grandchild, you’ll have to pay generation-skipping transfer taxes. As with the gift tax, you will pay taxes based on 40% of the value of the gifts, with a $12.06 million exemption.

Protecting Your Legacy

You worked hard to build and protect your wealth and to leave money to your heirs, so don’t let poor planning act as a barrier to your goals. To be sure that your wishes will be respected and your assets protected should you become incapacitated, you’ll want to establish a care plan for your dependents, appoint a trustee that you trust, guarantee orderly management of your property, and solidify your wishes for end-of-life treatment.

  • Appoint a dependable Power of Attorney (POA). If you become incapacitated, your POA will be in charge of any financial and legal matters, as well as any matters pertaining to property you own. They’ll also be able to manage your bank accounts, buy and sell property for you, manage any other assets you have, and open your mail. You may also want to consider a Healthcare Power of Attorney (HCPA), who would be able to determine medical treatment, long-term care, and make important decisions pertaining to your healthcare.
  • Complete a living will. Your living will acts as an advanced directive and provides you the opportunity to detail what your healthcare wishes are should you become incapacitated.
  • Create a revocable trust. This document allows you to appoint a successor trustee.
  • Declare Guardianship. If applicable, draw up a guardianship declaration determining who you want to care for of any dependent children you have. 

Avoiding the Probate Process

One of the most advantageous things you can do for your heirs is to help them avoid a lengthy and costly probate process. For this, you may want a living trust instead of a traditional will, despite it being more expensive upfront. This is because with a trust, not everything will be in your name, meaning you can bypass probate. That’s not to say you won’t still have control over your assets while you’re alive; you will, and you’ll be able to appoint a successor to take over if you become incapacitated as stated earlier.

If you choose to create a revocable trust, then there are even more benefits. You’ll be able to modify, amend, or revoke your trust at any point should your situation change. A revocable trust also qualifies as a grantor, letting you move your assets in and out of the trust tax-free. A living trust also allows you to place limitations if you’re nervous about how your beneficiaries may handle their inheritance.


SEE ALSO:  Review Your Beneficiary Designations Before You Retire

Additionally, a living trust gives you the power to specifically designate whether the assets in the trust will remain in the trust’s name and how they’ll be transferred to each heir upon your death. So, you’ll be able to ensure that your assets don’t end up in the hands of someone you don’t want them to. A living trust also protects your heirs from creditors and bankruptcy.

Concluding Thoughts on High Net Worth Estate Planning

Thoughtful estate planning is important for anyone, but especially so if you’re leaving a significant amount of wealth behind for your heirs. During the high net worth estate planning process, you’ll want to be sure that you’re taking the necessary steps so that your heirs aren’t saddled with a high tax burden or the unnecessary costs that come along with probate. Having a clear understanding of what to watch out for can help empower you as you begin looking for an estate planning attorney to help you carry out your estate plans.

At TriCapital Wealth Management, our team remains committed to delivering customized financial planning in a way that places our relationship with the client over everything else. You can rest easy knowing that our financial advisors are working with your best interest at the center of everything that we do. Contact us today if you’d like to begin a conversation about any of the assets in your estate.


Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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