High Net Worth Planning and Probate
High-net-worth individuals often face unique challenges regarding estate planning and probate. With a more significant estate and complex financial assets, it becomes even more critical to have a plan to protect your wealth and ensure a smooth transfer to your beneficiaries.
Estate planning is challenging for any family because there are issues that you do not want to address. However, you must consider your mortality and have unpleasant conversations if you plan to transfer your wealth to the next generation as seamlessly as possible. While having a high net worth can set up future generations of your family, it can also introduce additional considerations into estate planning.
You need to think about much more than if you are simply passing down a family home and some personal possessions. Your choices can determine whether your family needs to go through a complex legal process and how much tax your family may need to pay on the estate.
Estate planning for high-net-worth families is a process that takes time to complete. It may take many meetings with an estate plan attorney and numerous conversations to decide on suitable options. Then, you may need to change your estate plan over time to reflect your current situation.
If you have not considered estate planning, now is the time to see an real estate attorney. You want to make things as easy as possible for your family, for when you are no longer here and once you start to decline while you are still alive. The less they have to do, and the fewer ambiguities you can leave for them, the better off they are.
You Want to Minimize the Part of Your Estate That Goes Through Probate
Your estate does not automatically have to go through the probate process. Probate can cause complications for any type of estate, but there are even more potential issues involving multiple assets. It is time-consuming, with plenty of paperwork and potential disputes and delays.
There are ways to avoid probate entirely or minimize the amount of your assets that must go through probate. Trusts are one way for high-net-worth families to stay away from probate to the fullest extent possible. The reason why a trust does not have to go through probate is that the title to the asset transfers at the moment that the property moves into the trust. The probate process should wind up the asset so the property can ultimately transfer to the family. When you create a trust, you have already done that step.
Types of Trusts That Can Help High-Net-Worth Families
You may consider creating the following types of trusts as part of your estate planning process:
- Revocable trusts – The grantor creates these trusts while they are still alive and can change and amend them as necessary. Revocable trusts can help you avoid probate, but they do not provide complete asset protection because you still retain some ownership interest in your assets.
- Irrevocable trusts – When you create an irrevocable trust, you not only move the assets out of your name entirely but also surrender all decision-making power over them. An irrevocable trust is not changeable once you have created it, but it provides you with the maximum protection for your assets since you no longer own them.
- Asset protection trust – You can move assets out of your name and into a trust to protect them from creditors and judgments. An asset protection trust must be irrevocable to be effective.
- Spendthrift trust – If you are concerned that a beneficiary may spend the money once they have it, you can create a trust that can manage the money and control how they can spend it
- Charitable remainder trust – This is an irrevocable type of trust that can provide you and a charity with income from the assets you place into the trust for the rest of your life. After the trust, the charity will receive all of the remaining assets.
Numerous types of trusts may make sense for your situation, and there is no one-size-fits-all approach to estate planning. You may even opt for a combination of trusts for your assets to serve various purposes. An estate planning attorney can review your situation and who you want to take care of before they give you advice about your potential options.
Trusts can have several other benefits besides helping your family stay out of probate. You can use trusts to preserve and protect your assets for your overall family and specific family members who may need them in the future. In addition, trusts can provide you with an element of privacy and may reduce some of your tax obligations.
Transfer on Death Accounts
You may also want to maximize the amount of your assets in accounts that transfer automatically on the account holder’s death. For some accounts, you can name a beneficiary who will receive the assets once they provide proof of the death of the account holder.
These accounts can include:
- Retirement accounts
- Life insurance
- Investment accounts
- Bank accounts
None of these accounts must go through probate for the beneficiaries to receive the assets. Nonetheless, you need to ensure these accounts are current because the named beneficiaries will receive the proceeds from the account. For example, suppose you have gone through a divorce or had other life changes. In that case, you need to periodically review your beneficiaries in all your accounts to ensure they are correct and current. Otherwise, undesirable people may still receive funds from your accounts because the institutions must follow your instructions.
Use the Lifetime Gift Exception to the Fullest Extent Possible
You can give a certain amount of money as gifts in your lifetime without incurring additional tax obligations. Over time, you can act to reduce the size of your estate and get the money into your loved one’s hands now. According to the Internal Revenue Service, you can give away $13.61 million over your lifetime without paying any estate taxes. The amount you give away will not count against your taxable estate when it comes time to pay potential taxes. Then, you can see your family members have and enjoy some of what you have worked hard for while you are still here, and they will not need to wait for that part of the estate to go through the probate process.
Start Estate Planning Now
If you have significant assets, you must begin planning for your estate needs now, regardless of age. There is a time when it can be too late to start estate planning because everything depends on your health and capacity. Once you decline below a certain point, you cannot sign any legally binding documents. You cannot even draft a will because you will lack the capacity.
In addition, beginning estate planning now can also minimize the potential for family disputes. It gives you the time to have necessary conversations with family members and explain your choices to them. Family members can hear from you directly instead of learning about your plans from a trust document or a will.
What You Need to Think About with Estate Planning
There are numerous considerations at play when you are planning your estate and you have a significant amount of assets:
- You want to minimize certain tax obligations, including a potential estate tax.
- You want to keep disagreements among family members to a minimum.
- You want to maintain your family’s privacy as much as possible.
Then, there are other complexities when with high net worth estate planning, including:
- There may be a complicated mix of assets that you need to address that will otherwise have to go through probate, including real estate and personal possessions.
- You have specific legacy objectives for transferring your wealth to the next generation.
- Your family may owe money in taxes in multiple ways, and you want to minimize the amount they have to pay.
Selecting the Right Trustee
Much of the success of your estate plan depends on who you have selected as the trustee. This person is vital because they may have to make crucial decisions regarding your assets. They may make investment decisions determining whether you can successfully preserve your assets for the next generation or your favorite charity.
Before you select someone to serve as a trustee, you must ensure that they are up to the job. If the estate involves numerous assets, the trustee must be financially literate and have a certain degree of sophistication. For a high-net-worth family, there is a greater chance that the trustee is a professional or institution. A trustee owes a fiduciary duty to the beneficiaries, and they can even be personally liable if they make mistakes. The more money you have, the higher the chance you may consider an investment professional to serve as the trustee.
You must still finish estate planning even though you have established a trust. First, you need to move assets into the trust so they are not an empty shell. Second, you may need to amend and adjust the terms of your trusts (assuming they are not irrevocable) as your needs change. The terms of a trust are effective until someone amends them. You should occasionally review your existing trust instruments to determine whether you need to change them.
Even if you are more knowledgeable than the average person, you need help from an estate planning attorney. Wealth does not automatically equal experience and sophistication; high net-worth households can make mistakes that complicate their financial futures. An attorney can customize a plan that aligns with your goals and objectives. They can help you handle tax laws and estate planning strategies to maximize the preservation and growth of your assets. Your lawyer can also develop strategies to minimize taxes, reduce administrative fees, and expedite the transfer of assets to your beneficiaries.
The Consequences of Not Doing Estate Planning Now
Any time you do not have a proper estate plan in place, your family will face difficulties in the future. The potential problems become even worse when there are more assets in place. Your family will likely undergo a lengthy court process before fully distributing the assets to the beneficiaries. In the meantime, there may be sharp disagreements among family members, potentially leading to litigation and rupturing relationships entirely. Spending time and money on your estate plans is an investment you can make now in your family’s future.
How an Estate Planning Attorney Can Help
It is best to sit down with an estate planning lawyer as the first step in your process. They can speak with you and learn about your situation and the available assets. They will listen and come to understand what is important to you before they give you any advice. Your estate planning attorney’s job is to provide you with solutions and how you can achieve them.
An estate planning lawyer can advise you of your options and outline potential courses of action. They can also connect you with other professionals you may need to work with as part of the process, including potential trustees. An estate planning lawyer will also draft the necessary documentation for you to execute so they are done correctly and without any fear of error. You can trust an estate planning lawyer to give you both the advice you need and handle the details of your matter.
Having an attorney by your side throughout the planning and probate journey can provide peace of mind. They have the knowledge to address potential risks and uncertainties and will work to carry out your wishes and protect your legacy. With their guidance, you can confidently handle estate planning and probate and secure your wealth’s future for generations to come.
It is crucial to have a trusted advisor who understands the challenges of individuals with significant assets. An Seattle real estate attorney can provide the experience and guidance necessary to create a plan that minimizes risks, maximizes opportunities, and ensures a smooth transfer of wealth. Contact an attorney today who can help you plan for the future and preserve your assets.
