I'm High Net Worth. How Should I Start Estate Planning?

(SmartAsset) - If you have a high net worth, it’s important to have a good estate plan in place.  While putting these plans together can be tricky no matter the circumstances, things get more complicated if you have a high net worth.

There is a lot to think about, including estate taxes, trusts and gifting. We’ll take a look at some of the best strategies to consider so you won’t have to worry about what will happen when you’re gone.

For help with planning your estate, consider working with a financial advisor.

Establish a Trust

For high-net-worth individuals, establishing a trust is an essential step in protecting your wealth. Trusts provide a number of benefits, including passing your wealth to your children and other beneficiaries. Trusts also keep your records private and allow you to avoid probate court when your assets are distributed.

There are multiple kinds of trusts, but you will most frequently hear about revocable living trusts and irrevocable trusts. Revocable living trusts, as their name implies, allow you to remain in control of the trust while you are still alive. This means you can make various changes, including naming beneficiaries and managing funds in the trust.

Irrevocable living trusts, then, are what remains after you die. A revocable trust becomes irrevocable at that point and can no longer be changed, but you can appoint a successor trustee to manage the trust for you while you are still alive.

Selecting Trustees and Beneficiaries

The trustee is the person or entity that manages the trust and has legal title to it. You can be your own trustee, or you can appoint a third party; multiple people can also be trustees. Who acts as trustee is up to you; you can act as your own trustee or appoint someone. For instance, if you don’t feel you have the expertise needed to manage it, you can hire someone to do that for you.

Minimizing Taxes

Much of the strategy that goes into estate planning revolves around tax minimization. This is because estate tax has a top rate of 40%. If you are a high-net-worth individual, at least some of your estate can be taxed at that rate if you aren’t careful. These strategies will help you minimize the amount of tax that is charged to your estate.


Gifting can be an effective way to reduce the taxes against your estate. This can be an effective strategy for those with a high net worth. The Tax Cuts and Jobs Act increased the lifetime federal gift and estate tax exemption to $12.06 million per individual for 2022. For married couples, the amount is $24.12 million.

You can give a gift of $16,000 per year, per person under this exemption. There is no limit to the number of people who can receive gifts from you. If you give more than the exemption amount to someone, the first $16,000 is exempt. However, gift amounts above $16,000 will be taxed at a rate of 40%. Note that the same total also applies to estate tax exemptions, so the gifts you give will reduce your estate tax exemption.

Charitable Giving

Giving to charity can be a great way to leave a legacy – but it can also reduce the amount of taxes you owe. You can do this by establishing a charitable remainder trust (CRT) or charitable lead trust (CLT), for example. You can also list a charity as the beneficiary of your estate. Leaving a part of your estate to a charity may reduce capital gains tax as well as income tax and can help you reduce your estate tax as well.

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Life Insurance

Life insurance is more than just a way to reduce the financial burden on your loved ones after you die. Indeed, life insurance can also help lower your estate tax. Those with a high net worth often have significant value tied up in real estate and businesses. Fortunately, a properly structured life insurance plan can cover most of the tax that would normally be charged against these assets.

Incapacitation Planning

One of the necessary parts of planning your estate is planning for incapacitation. While it may not be much fun to think about, choosing people to make decisions on your behalf will ensure your family isn’t left to make difficult decisions for you. Instead, you can work with an attorney to put a plan together.

That should include selecting a durable power of attorney, financial power of attorney and medical power of attorney. You will also want a Health Insurance Portability and Accountability Act (HIPAA) release agent who can access your medical records when needed.

The Bottom Line

People sometimes put off planning their estate, but the sooner you get through the process, the better. Having a proper estate plan will reduce the financial burden on your loved ones while also ensuring they aren’t left to make difficult decisions when you are gone. It can also ensure your estate is handled according to your wishes. Failing to have a plan in place could result in courts making decisions for you.

Tips for Estate Planning

  • If you have investments, they may be subject to capital gains if they are sold. Estimate those taxes with SmartAsset’s capital gains tax calculator.

  • A financial advisor can help you with estate planning regardless of your net worth. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.


By Bob Haegele


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