Everyone should have an estate plan. However, if you are a millionaire, you want to have one to protect your estate. Millionaire estates typically include multiple homes, business ownership, art collections, expensive jewelry and collectible cars. However, a modest estate of a home, retirement accounts and a desire to pass wealth on to family members also need an estate plan.
A recent article from Kiplinger, “Estate Planning for Millionaires,” divides wealthy people into several categories: Mass Affluent, with liquid assets between $100,000 and $1 million; High Net-Worth Individuals with at least $1 million; Very High Net-Worth Individuals with at least $5 million; and Ultra-High Net-Worth Individuals with at least $30 million.
Regardless of which category you fit into, you need an estate plan to appoint trusted individuals to handle your affairs in case of incapacity or death. Your estate planning attorney will know which documents are used in your jurisdiction to establish your wishes and ensure that they align with local laws.
An estate plan needs one person who is like a quarterback and can coordinate all of the trusted professionals on your team, including a financial advisor, tax professional and business attorney. These different disciplines must work together for your estate plan to be effective.
Everyone needs to have certain documents: a last will and testament, revocable trust, powers of attorney for finances, powers of attorney for health care and a living will to express wishes concerning end-of-life care. With the information in these documents, executors and family members will know your wishes, which avoids heartbreak for family members.
Once you start working with an estate planning attorney, you’ll need to name a trustee to oversee any assets placed in a trust. You may wish to name a financial institution if you don’t want a family member or trusted friend to take this role.
Business owners often do better with a professional trustee for several reasons. If the business entities are large and complex, will a family member know how to manage the assets? Can they work with the estate planning attorney, business attorney, financial advisor and accountant to steward the assets for the beneficiaries?
Estate planning for people at all levels of wealth also involves tax planning. This is especially important now, with the possible sunsetting of the Tax Cuts and Jobs Act of 2017. Estate tax exemptions are historically high, $13.61 million for individuals and $27.22 million for married couples. On January 1, 2026, those numbers will drop significantly. State estate taxes may change depending on where you live, especially if you live in a state whose estate tax levels are tied to federal estate tax exemptions.
Your unique situation will dictate what kind of trust or trusts you need. An Irrevocable Life Insurance Trust (ILIT) could be used to own your life insurance policies, with customized directions for how you want the proceeds to be distributed upon your death. Suppose you have a family member with special needs. In that case, you’ll want a Special Needs Trust (SNT) to provide financial support for them without putting their eligibility for means-tested government programs at risk.
Gifting to individuals and charities serves several purposes: taking assets out of your taxable estate, in the case of donations, earning tax deductions and letting you enjoy seeing the results of your generosity while you’re still living.
Communicating your wishes to beneficiaries while living is often a wise strategy to prevent misunderstandings and resentments. You don’t have to give specific numbers, but by sharing insights into what you hope to accomplish with your decisions, family members may be less inclined to engage in disputes. They can blame you instead of each other! Book a call with the Law Office of Mark McMullin to start planning.
Reference: Kiplinger (July 19, 2024) “Estate Planning for Millionaires”