No matter whether you have a small estate or a large one, the fundamental goal of estate planning is always the same: You want to make sure that your assets are distributed according to your wishes once you are gone.
However, high-net-worth individuals often find that they experience unique complexities that go beyond the scope of regular estate planning. The stakes are higher, so the strategies have to be more intricate. Here are some of the reasons why:
Taxation is a major consideration
One of the most significant differences between ordinary estate planning and high-net-worth estate planning is the potential tax liabilities involved. For estates that exceed the federal estate tax exemption ($13.61 million in 2024), up to 40% of the estate’s value can be lost – and even more can be lost to state tax, which only exempts $6.94 million.
Some of the strategies that can be incorporated to protect a large estate include grantor-retained annuity trusts (GRATs), charitable remainder trusts and taking advantage of annual gift tax exclusions.
Business success planning may be necessary
For business owners, the issues involved become even more amplified, especially when the goal includes making certain that the business survives the transition of ownership. The goal is not only asset protection but the preservation of one’s legacy, and there are often challenges balancing the interests of the heirs who want to be involved in the business with those who do not.
Some strategic approaches include the use of buy-sell agreements to help with the transition, making certain that life insurance policies are in place to provide liquidity for estate taxes and the buyout of certain heirs and family limited partnerships (FLPs) for helping the family retain control of the business without being unnecessarily burdened by taxes.
Asset protection is essential
The more money someone has, the more likely they are to be the target of lawsuits, creditor claims and – possibly – fraud. Protecting one’s estate from these risks is an essential part of estate planning, and it can require complex legal maneuvers.
In high-net-worth estate planning, the risks of mismanagement are much more costly than they are in regular estate planning situations. That makes it essential to seek legal guidance from the beginning.
