Estate Planning Solutions: Ultimate Guide by PillarWM

It is natural to want your loved ones to be protected, even when you are gone. When high net worth individuals and families create an estate plan at PillarWM, we make sure the wealth and assets they have accumulated stay with their loved ones after their demise, providing their spouse, partner, children, parents, siblings, grandchildren, friends, and other beneficiaries with the security they need for the future.

Many high earners mistakenly assume that if they have a will, their estate planning is complete. However, that is far from the truth. There is so much more to a well-thought-out, all-encompassing estate plan. A good estate plan is designed to prevent probate, protect assets in case you need to move to a nursing home, save on estate taxes, and choose somebody to act for you in case you ever become disabled, physically or mentally.

So, if you are thinking of undertaking this task yourself, we’d like you to stop and think again. Estate planning should only be handled by qualified personnel, and hence, we strongly encourage you to seek professional assistance. This is where Pillar Wealth Management can help! Our experienced wealth managers specialize in estate planning for investors with $5 million to $500 million in liquid assets. Grab a free copy of our book titled 7 Secrets To High Net Worth Investment Management, Estate, Tax, and Financial Planning for a much deeper dive into estate planning.

You can also schedule a free consultation with one of our estate planners and get started with estate planning solutions right away! Till then, keep reading to learn more about estate planning, including the necessary components of an estate plan.

Table of Contents
Wills Power of Attorney Trusts Medical Directives Beneficiary DesignationsConvert Conventional Retirement Accounts to Roth Accounts Wisely Gift Assets While Alive Be Smart About SMSFs and Superannuation

What Is Estate Planning?

In a nutshell, estate planning refers to designating who will eventually receive your wealth/assets and take over your responsibilities if you die or are incapacitated. One of the core objectives of estate planning is to make sure beneficiaries receive assets in a manner that minimizes estate tax, income tax, gift tax, and any other taxes.Use our Financial Advisor Guide to choose the best estate planning specialist who can help you minimize your tax burden.

There is no denying that estate planning seems like a daunting task; nonetheless, it is something every high net worth and ultra-high net worth (in particular) individual must face. There are several components of estate planning, and although there is a common misconception that it is just about your finances, the reality is there is much more to it.

In the next section of this post, we highlighted the five components of estate planning in an easy-to-understand manner. This Estate Planning Solutions Guide by PillarWM will give you the security and peace of mind that comes with knowing you have appropriately planned for the future of your nearest and dearest.

Five Components of Estate Planning

For good estate planning, you must first understand its core components. As stated earlier, an estate plan communicates what happens to your wealth and assets and who can act on your behalf in case you’re unable to. To make sure all your wishes regarding your wealth are respected, these five components must be part of your estate plan:

Wills

A will is a legally-binding testament that identifies the recipients of an individual’s wealth and assets after their demise. In general, when there is no will, the state decides how the assets will be distributed. In addition,a will assigns a legal representative (commonly known as a personal representative or an executor) to fulfill the wishes of the deceased. Wills are particularly important for individuals who have minor children as it enables them to name a guardian for the children till they come of age.

Nevertheless, it is crucial to note that wills cover only probate property. Several kinds of property or types of ownership fall outside of probate. Life insurance proceeds, jointly-owned property, property with a named beneficiary (e.g., 401(k) plans or IRAs), and property in trust all fall outside of probate and are not included in a will. A qualified estate attorney can help you draft a will. Moreover, if your liquid assets exceed $10 million in value, do give our $10m guide a read.

Power of Attorney

A power of attorney can enable the individual you appoint – called an “attorney” – to make financial decisions in case you become incapacitated. The attorney you select will have the power to step in and oversee your financial affairs. Without a robust power of attorney, nobody will be able to represent you unless a judge appoints a guardian or conservator. But the entire court process will require time, cost money, and in a worst-case scenario, the judge might not even pick the person of your preference. In addition, under a conservatorship or guardianship, your representative might have to get permission from the court in order to take planning steps that he/she could otherwise have implemented instantly under a power of attorney.

Trusts

Trusts are legal arrangements through which an individual (or an institution, like a law firm or bank) refer to as a “trustee,” holds licit title to property for another individual, known as a “beneficiary.” A trust has a group of beneficiaries, during their lifetime, and another group – usually their offspring – who receive benefits only after the demise of the first group. Moreover, there are numerous reasons for establishing a trust, however, the most common is to evade probate.

If you set up a revocable living trust that ceases once you pass away, all property in the trust is immediately transferred to the beneficiaries. This can save both the beneficiaries money as well as time. Some trusts also provide tax advantages for the beneficiary and the donor. These could be “life insurance” or “credit shelter” trusts. Some trusts can even protect property from creditors or help donors qualify for Medicaid. Unlike a will, a trust is a private document, and only people with a direct interest in the trust are aware of its assets and distribution. Assuming they’re well-drafted, another major benefit of trusts is their persistent success even if the donor becomes incapacitated or passes away.

To learn more about setting up a trust, do not hesitate to request a video meeting with our best estate planning specialist at your convenience.

Medical Directives

Medical directives may comprise an array of different documents, such as aliving will, power of attorney for healthcare, health care proxy, and medical instructions. The exact document(s) depends on the laws of the state where you live and the decisions you make.

Both powers of attorney and health care proxies appoint someone of your choice to make healthcare decisions for you in the event you’re unable to do so yourself. Additionally, a living will directs healthcare providers to remove life support if you’re in a vegetative state or critically ill. Medical directives may also encompass the conditions of a living will. They’ll also give directives for when you’re in a less severe health state but are unable to navigate personal healthcare yourself.

Beneficiary Designations

Beneficiary designations aren’t necessarily part of your estate plan; however, when you are creating one, it is crucial that you ensure your retirement plan beneficiary designations are up to date. As mentioned earlier, if you do not name a beneficiary, the distribution of your wealth might be controlled according to your particular retirement plan (for example, some retirement plans automatically distribute assets among children or a spouse) or by federal or state law. Though others might leave it to the retirement plan holder’s estate, it is worth noting that this could lead to negative tax consequences. The best and perhaps the only way to control where your assets go is to name a beneficiary. 

Estate Planning Solutions to Protect Your Assets and Family

The assets you leave behind can be devoured by taxes or provided to the wrong person. Here are some tips to make sure something like that does not happen:

Convert Conventional Retirement Accounts to Roth Accounts

People with conventional IRA or 401(k) accounts often unintentionally leave their beneficiaries a huge tax bill as income tax has to be paid on distributions from all conventional retirement accounts. In the past, non-spousal inheritors, like children, could stretch those distributions throughout their life, successfully diminishing total taxes due. However, now, beneficiaries (except spouses) are mandated to withdraw all money from a retirement account within ten years. The larger the account balance, the more significant distributions that will be taxed at a greater rate. To protectyour loved ones, we recommend converting traditional retirement accounts to Roth accounts. The money will still be subject to ordinary income tax, but the withdrawals are tax-free.

Wisely Gift Assets While Alive

One of the best ways not to worry about estate tax planning is to simply gift your wealth away while you are still living. According to IRS instructions for 2021, you are permitted to give up to $15,000 (per person) yearly in gifts. If your aim is to minimize estate tax, these gifts can considerably bring down the value of your estate. But be wary of giving away assets that appreciate in value, like a house or stocks, which get a step-up in basis when part of an estate plan. This means the asset’s taxable amount is adjusted when the owner dies. Thus, it may be better to transfer certain assets after death instead of before. Speak to a tax professional for guidance in this area. To learn more about this, conduct a video meeting with our wealth managers.

Be Smart About SMSFs and Superannuation

Some individuals decide to initiate a self-managed super fund (SMSF) as a means to build and protect their assets/wealth. This is a decent strategy if you are seeking better tax management, improved direct investment risk management, and increased control over investments. But we can’t deny that SMSFs come with drawbacks; they entail greater running costs, and the overall responsibilities are substantial. In addition, penalties could be levied in case you run into non-compliance issues.

Consulting with a wealth management specialist on your SMSF or superannuation can help you to draft a wealth-building strategy that also meshes with your estate planning.

PillarWM Estate Planning Solution: Delivering Estate Planning to The Right People at The Right Time

The ever-changing financial industry and tax laws certainly do not make it easier for people to build their own estate plan. With PillarWM Estate Planning Solutions, our experts protect your long- and short-term interests and wealth. Under the guidance of our co-founders, Chris Snyder and Hutch Ashoo, who have 64+ years of combined experience, dating back to 1988, PillarWM has helped thousands of high net worth individuals and their families to maximize the inheritance of the people they care about, making sure their estate is distributed to the right people, at the right time, and in the right way.

At Pillar Wealth Management, we provide professional, qualified estate planning services, such as lasting power of attorney, wills, lifetime trusts, and will trusts. We specialize in services for investors with $5 million to $500 million in liquid assets. The priority of our estate planning specialists is to deliver a personal, reliable, and reassuring experience, leaving you safe in the knowledge that your loved ones will have everything they need after you are gone. We can help you find peace of mind and make life as simple as possible for you and your family.

To talk to an experienced estate planner, schedule your first free meeting today!

 

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