Advanced Estate Planning

Advanced estate planning is an essential aspect for high net worth families to protect their assets and ensure their legacy is preserved for future generations. In this blog post, we will explore some of the most effective estate planning tools available for high net worth individuals and families.

Revocable Trusts Revocable trusts

Revocable Trusts Revocable trusts, also known as living trusts, are an estate planning tool that allows individuals to maintain control over their assets while they are alive, and then transfer those assets to their beneficiaries upon their death. Revocable trusts are flexible, allowing the individual to modify or revoke the trust at any time. Additionally, revocable trusts do not offer any tax benefits, but they do provide privacy as they do not need to go through probate court.

Irrevocable Trusts

Irrevocable trusts, on the other hand, are generally permanent trusts that cannot be changed once established. These types of trusts can offer significant tax benefits by removing assets from an individual’s taxable estate, thereby reducing estate taxes. Irrevocable trusts also provide protection against creditors and potential lawsuits as the assets are no longer considered part of the individual’s estate.

Credit Shelter Trusts A credit shelter trust, also known as a bypass trust, is a type of irrevocable trust that allows married couples to utilize both of their estate tax exemptions. When the first spouse passes away, the assets placed in the credit shelter trust are sheltered from estate taxes. This means that the assets in the trust will pass to the beneficiaries without being subject to estate tax. The surviving spouse can still access the assets in the trust, but the assets will not be included in their estate when they pass away.

Irrevocable Life Insurance Trusts (ILITs)

Irrevocable life insurance trusts (ILITs) are a type of irrevocable trust that holds life insurance policies. The trust is the owner of the policy and the beneficiaries are designated by the individual who established the trust. ILITs are often used to remove life insurance proceeds from an individual’s taxable estate. This can provide significant tax savings, as life insurance proceeds are typically subject to estate tax. Additionally, ILITs provide privacy, as the life insurance proceeds are not subject to probate court.

Generation-Skipping Transfer Trusts (GSTT)

A generation-skipping transfer trust (GSTT) is a type of irrevocable trust that allows individuals to transfer assets to their grandchildren or other beneficiaries who are at least two generations below them. This allows the individual to avoid estate taxes that would be incurred if the assets were transferred directly to their children. GSTTs can provide significant tax savings, but they are subject to complex tax rules and should be established with the assistance of a qualified estate planning attorney.

Grantor Retained Annuity Trusts (GRATs)

A grantor retained annuity trust (GRAT) is a type of irrevocable trust that allows individuals to transfer assets to their beneficiaries while still receiving income from those assets for a set period of time. The income is paid out as an annuity, and at the end of the set period, the remaining assets are transferred to the beneficiaries. GRATs can provide significant tax savings, but they are subject to complex tax rules and should be established with the assistance of a qualified estate planning attorney.

A Family Limited Partnership (FLP)

A Family Limited Partnership (FLP) is a legal structure that allows families to transfer wealth to future generations while still retaining control over those assets. FLPs can provide significant tax benefits, such as reduced estate and gift taxes, and protection against creditors and potential lawsuits. Additionally, FLPs allow for centralized management of assets and can be used to plan for business succession. However, setting up an FLP can be complex and should be done with the assistance of a qualified estate planning attorney. FLPs are a popular estate planning tool for high net worth families looking to preserve their legacy and wealth for future generations. 

All of the strategies mentioned should be developed by working closely with an estate planning attorney.  Estate planning services provided in conjunction with a licensed legal professional.

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