No matter how overwhelming estate planning sounds, putting it off is never a good idea. If you want to ensure that your assets and wealth are transferred to your intended heirs, having a comprehensive estate plan is crucial. This becomes even more important if you’re a wealthy person with over $10 million in liquid assets, in which case our guide titled 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning should be of great help.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
For more comprehensive assistance, reach out to Pillar Wealth Management, which specializes in serving investors with $5 million to $500 million in liquid assets. While estate planning is for everyone, this guide will take an in-depth look into estate planning for wealthy families. Let’s begin by answering, “What are the benefits of estate planning?”
Benefits of Estate Planning
Avoids Family Conflicts
Often, families and heirs will fight among themselves for the wealth of the parents who didn’t create an estate plan. One sibling will think they deserve more than the rest, while another, who is known to be reckless with cash, might want to be in charge of the finances. Squabbling like this often ends up in court.
Estate planning is an effective way to prevent an inheritance process from becoming a horror story for families. Not only does the planning effort goes a long way to quell a family strife, but it also enables you to choose who controls your assets and finances when you die or become mentally incapacitated. It’s like an insurance policy for your assets to ensure they are handled the way you want.
For example, someone in your family might be better off not inheriting a lump sum, so you may decide to establish a trust for them. Similarly, you may want to make arrangements for a handicapped child or give more to a child who cared for you in your final years. Or you can simply choose to divide your wealth equally among all your heirs.
Besides, if you have had more than one spouse and have children from each, the need for estate planning can’t be stressed enough. Not planning an estate can lead to some serious wars between the families. To learn more, schedule a video consultation meeting with our wealth managers.
One of the biggest goals of estate planning is to designate heirs for your assets, such as a stock portfolio or one or more properties. This doesn’t apply only to wealthy families. To perform well in the real estate or stock market, you don’t have to be rich. Thus, everyone, including middle-class families, need to have an estate plan to ensure that the beneficiaries get what they’re entitled to.
Not having an estate plan means that the court divides your assets, which is not only time-consuming and costly, but it may also turn ugly. For instance, if you leave behind a second home without deciding who will inherit it, you have no control over what happens to it after your death. Since the court has no way of knowing which sibling shouldn’t be given free access to cash and which one is financially responsible, its decisions won’t likely be rational.
Perhaps you wanted your highly responsible surviving spouse to receive everything and, subsequently, distribute it among the children. A court would probably not allow that. So, you should sort things out yourself through estate planning before you pass away.
Keeps Transfer Taxes to a Minimum
If you’ve accumulated substantial wealth, you’ll probably want to transfer it to your heirs or other family members upon your death. But do you know that the IRS places limits on the amount of money you can transfer and to whom without getting taxed? Anything you transfer, over and above the caps, will be subject to taxes that your heirs will need to pay.
Nevertheless, estate planning is an effective way to ensure that your family inherits your wealth in the most tax-efficient manner. When transferring money, there are three types of taxes to consider, namely generation-skipping transfer tax, estate tax, and gift tax.
An experienced financial advisor can even help you develop a robust wealth transfer strategy as part of your estate planning, so as to minimize the taxes that apply to you or your estate. To find the right financial advisor, study our guide titled the Ultimate Guide to Choosing the Best Financial Advisor for Families worth $5 Million to $500 Million.
Meets Your Own Care Needs
Many people view estate planning only as a way to protect their beneficiaries, not realizing how it helps them personally. In the event that you become incapacitated and can’t make decisions for yourself, your estate plan will not only ensure protection of your assets but also fund your medical needs.
When you build your estate plan, you will estimate the cash flow needs for your retirement and beyond, including how much will go to long-term insurance. Moreover, designate a power of attorney or healthcare proxy who makes financial and medical decisions on your behalf, if needed. This information can prove incredibly useful to you if you become unable to provide for yourself.
Talk about it with an experienced financial advisor, who will let you know what else you can do to ensure that your needs and wishes are met when you’re unable to speak for yourself.
Meets Your Philanthropic Goals
Philanthropy is an effective way to ensure that you’re remembered after you die, which is why many wealthy individuals make it a priority in estate planning. In the legacy planning section of their estate plan, they’ll establish philanthropic intentions how to execute them when they die. Some of the options include participating in a donor-advised fund, creating a family foundation, and setting up a charitable trust.
By planning early, you can ensure that your family members are familiar with your plans, so they can process the estate accordingly.
Now that you can answer the question, “Why should everyone have an estate plan?”, let’s move on to some valuable estate planning strategies for wealthy families.
Estate Planning Tips for Wealthy Families
Accumulate Your Assets
Don’t fall for the idea that you don’t have enough wealth to justify having an estate plan. Look around, and you’ll probably be surprised by how many tangible and intangible assets you have. Examples of tangible assets include real estate like land and homes; collectibles like trading cards, coins, antiques, or art; and vehicles like motorcycles, cars, or boats.
Intangible assets, on the other hand, include business ownership, insurance policies, health savings accounts, certificates of deposits, savings and checking accounts, and retirement plans like 401(k).
Once you’ve developed a list of your assets, estimate their total value.
Draw Up a Will
The most basic estate planning strategy is to write a will, which describes what happens to your assets after your death. Although this step is obvious, many individuals fail to follow it. According to the 2021 Estate Planning and Wills Study by Caring.com, only 33% of the surveyed 2,500 Americans said they have a will.
When you have a will, your heirs will only need to get it reviewed and confirmed as valid in probate court. Your money and assets will then be divided among them as per your instructions in the will. However, not having a will means the court decides how your estate will be divided.
But probating a will is an expensive and slow process, so you must start drawing up your will as early as possible.
Set Up a Trust
You may also be asking, “Does estate planning include a trust?” The answer is “yes”, depending on your circumstances. If you worry that your heirs won’t be sensible with your money, or your estate is enormous, you may establish a trust, appointing a trustee to distribute your wealth. The idea makes most sense when one or more beneficiaries are supposed to receive assets worth more than $250,000.
There are several ways to set up trusts, the most beneficial of which are permanent or irrevocable trusts. Putting your money in an irrevocable trust means your assets will no longer remain yours, so they won’t be subject to estate taxes. The amount will belong to the trust, with the trustee controlling the money based on the stipulations you create on its use. Plus, everything you put in a trust can be divided among your heirs even when you’re alive. This isn’t possible when you solely rely on a will.
Keep in mind that trusts tend to be complicated, so it’s best to rely on expert advice. To learn more about setting up trusts, schedule a video consultation meeting with our wealth managers.
Protect Your Assets
Safeguarding your assets for the future is just as important as other aspects of estate planning. One effective way to do that is to consolidate your assets. Diversification of your portfolio will largely depend not on where your accounts are held but how you invest. When it comes to investing, our guide titled 5 Critical Shifts for Maximizing Portfolio Growth Strategies — For Families Worth $5 Million To $500 Million can be of great help.
When you have multiple accounts scattered between various institutions, not only can this cause unnecessary confusion, but the opportunity to experience real growth might be missed. Consolidating your assets under a single wealth manager is a valuable solution. They will also help you closely track portfolio performance. To learn more, read our Performance guide.
Determine Whether You Need a Professional
While everyone should invest in estate planning, the decision as to whether or not you should hire a financial advisor or wealth manager to help you with estate planning depends on your unique situation.
Having a small estate and simple, straightforward wishes won’t require any advisory services. An online will writing program may be sufficient. Typically, such programs comply with state-specific and IRS requirements and will involve an interview about your finances, bequests, and lifestyle.
However, if you own a large estate or one with complications like non-familial heirs, special child concerns, or business issues, you definitely need a financial advisor to help you with estate planning. Similarly, if you have any concerns about the process, we recommend hiring a professional. They will ensure that you’re on the right path and stay on it when developing your estate plan.
Some states have their own inheritance or estate taxes. If you’re in any of those states, an advisor can help you understand their laws and how you can minimize your tax burden.
To sum up, estate planning is a key obligation, regardless of the wealth class you belong to. Whether you’re a middle-class person or belong to a high net worth family, developing an estate plan before you die or become incapacitated is more important than ever. The greater your wealth, the more complicated the process can be. To make estate planning seamless, hire a wealth manager from Pillar Wealth Management, which specializes in serving investors with $5 million to $500 million in liquid assets. Start with a video consultation meeting with our wealth managers.
To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.
We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.
You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.
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