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Created: February 12, 2019
Modified: July 5, 2023

Estate planning for the wealthy — How to do it right


Understandably, people of higher net worth put a great deal of thought into how their investments are managed.

It’s one of the reasons they have such high net worth — they have earned a significant amount of money, and they want to see that money work for them in the best possible way. They want growth maximized and losses minimized, and the result is a more robust portfolio that allows them to get even more enjoyment out of life.

But what about their estates? What about the money and assets that, obviously, they will not be able to enjoy after they pass on? How can they ensure that these assets are well-managed and controlled, and their heirs are cared for and looked after? This is a discussion many may not want to have — after all, who wants to think about their death? — but is still an essential one.

The bottom line is this: Wealthy people can control what happens to their estates even after they die. And that is a good thing.

It all begins with asking some basic questions. How do you want to control your money once you are no longer able to manage your affairs, or once you die? How do you minimize your tax burden so those inheriting your estate achieve the maximum benefit?

It starts with a healthy understanding of gifting strategies, things you can do while you’re still in control. There is a basic level of gifting allowed annually ($15,000 per person, given to as many people as desired, for both a husband and wife), but there are opportunities well beyond that for wealthy people to employ.

There are charitable trusts that can be created (either charitable lead trusts or charitable remainder trusts), which give parents or grandparents the ability to move assets out of the estate, to satisfy a charitable inclination and also leave money to the children or grandchildren.

Additionally, there is money that can be gifted from a business the person owns. Let’s say the parents own a $10 million business. A total of 10 percent of that business can be gifted to a child or children while the parents are still alive, and tax-wise the value of that gift can be considered much less than $1 million because it has been made illiquid and unmarketable.

So those are just two examples.

The biggest mistake in estate planning, in particular with wealthier individuals, comes from a lack of planning. Managing an estate is different from managing one’s personal wealth and investments, in that tax laws often change (as they did recently in 2017 when the Tax Cuts and Jobs Act significantly increased the federal non-taxable threshold for estates) and family dynamics tend to change as well. So, for those who have estates of significant value, it is best to examine them every few years to make sure everything is up to date tax-wise and reflect that family’s reality.

Parents or grandparents who have estates in place need to consider a number of factors in how the plans will be managed once they are gone. Are the children/grandchildren equipped to properly manage large sums of money, or does a trust need to be established where access to the funds is restricted? Do the beneficiaries understand and appreciate money and its value? Are there concerns about the long-term stability of a child’s marriage? Are there personal situations such as physical health, mental health or dependency issues of surviving children that must be carefully managed?  These are all questions that need to be asked before it is too late.

The truth is that there is no such thing as a “perfect” estate plan, and people should not fall into the trap of “letting perfect be the enemy of the good.” What this means is responsible planning can cover any number of variables, but it’s impossible to see every possibility or scenario coming.

So rather than taking the option of doing nothing at all, strategic planning with careful attention paid to a number of different factors should result in a healthier, better-managed estate. And that is something for which your children or grandchildren will thank you, even after you are gone.

Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.

Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.

Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.

Joel Johnson, CFP®
Managing Partner at Johnson Brunetti
Joel Johnson, CFP®
Joel Johnson, the Managing Partner of Johnson Brunetti, has been in the financial services industry since 1989. As a CERTIFIED FINANCIAL PLANNER™ professional, Joel and his team have helped thousands of families develop their own individualized retirement plans based on the unique needs of those approaching the second phase of their lives. Starting from humble beginnings but developing a strong work ethic early on, Joel’s grandfather taught him by serving others first and creating value for someone else, you will never have to worry about money. These important life lessons were the driving…
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