4 Practical Estate Planning Strategies for High Net-Worth Families

Individuals with high net worth have several unique considerations to address when it comes to ensuring their estate is handled properly. If you own a high net-worth estate (worth more than $1 million in liquid assets), it’s important to have a coordinated estate plan that protects you and your loved ones and enables the ease of distribution of your assets and property. 

A solid estate plan includes documentation like a will, living trust, power of attorney, and a Mississippi advance health care directive. These enable you to coordinate the distribution of assets and appoint guardians for minor children and those with special needs. They also empower those who can make legal and medical decisions in your best interest to have the authority to do so should you pass away or become incapacitated and unable to communicate your wishes.

Beyond that, those with a significant amount of wealth should consider the available options to protect as much of that wealth as possible. Here are 4 basic strategies to help preserve your legacy for your loved ones.

  1. Consider a trust to avoid estate and gift taxes. 

Mississippi is among 38 states that don’t levy an estate tax. However, the 2023 federal estate tax has a threshold of $12.92 million. Earners making more than this, or couples making more than $25.84 million combined, will be subject to federal estate tax of 18-40%.

One solution for high net-worth families to this is to set up a special trust to pay beneficiaries an annual income through the trust or transfer appreciating annuities to their heirs. Some of these types of trusts include :

Irrevocable Life Insurance Trust: An ILIT is a great legacy planning tool that can help minimize taxes and distribute proceeds after the insured’s death.

Charitable Remainder Trust: Irrevocable trusts like this can pay you or your beneficiaries annual income from assets you donate to the trust.

Spousal Lifetime Access Trust: Make a monetary gift to a spouse and remove the gifted asset from the spouse’s combined estates.

Grantor Retained Annuity Trust:  Set up this kind of trust to transfer appreciating assets to your heirs, minimize gift or estate taxes, and potentially plan for your retirement.

You will want to seek the advice of a qualified estate planning attorney in your area to learn which options might best fit your unique needs.

  1. Utilize gift planning to avoid gift taxes.

Gifting annually or choosing a one-time gift up to your lifetime exclusion can be a great long-term financial choice for wealthy families and their heirs.

It should be noted that both state and federal tax laws change over time, and you may need to review and update this plan in the future to best serve your needs and make sure gift planning is a practical move. The existing federal Estate tax laws are set to expire in 2026, and an estate planning professional can help you make financial choices that provide the most protection for the value of your estate.

  1. Invest in life insurance.

Life insurance is often used to pay estate taxes and divide assets or specific amounts to your loved ones after your death. For example, if your wealth is tied up in properties, your heirs will have access to life insurance funds to pay taxes and other estate fees. 

Additionally, if your wealth is tied up in a business or properties that you intend to bequeath to only one beneficiary, your life insurance can be used to divvy up liquid wealth among those heirs who have not inherited that wealth. You should speak with your financial and legal advisors to learn how to best leverage and protect your life insurance funds.

  1. Choose the right people to ensure your final wishes are managed well.

When selecting trustees, executors, and institutions to enforce your wishes, you must choose carefully. You deserve to feel confident that the extra care and planning you perform on the front end will ensure your estate plan is executed precisely.

If you’re searching for the right professional to help take care of your estate planning needs. Schedule a consultation with Lancaster Law Firm to further discuss all of your estate planning needs.