Individuals with a high net worth have complex estate planning and tax needs. Without strategic planning, estate taxes could significantly reduce the value of your legacy. An experienced estate planning attorney who provides high net worth tax planning and high asset estate planning could help protect your assets from excessive estate taxes. With knowledgeable guidance on the potential tax liability and options to achieve tax savings, you can make the best decision for you and your family.
The Advantages of High Net Worth Tax Planning
Amassing and maintaining a large estate takes great effort. Hard work, shrewd recordkeeping and investing, and avoiding debt accrual helped you reach this point. But it’s never too early to think about tax planning for your estate.
Although you might think that you have plenty of time to worry about estate planning, the more prudent course is to start planning as early as possible, especially when it comes to high net worth tax planning. If you don’t have a tax strategy, you could miss out on tax benefits and/or pay more taxes than necessary. By starting federal estate tax strategies early, you may also benefit from tax savings during your lifetime, such using a trust to shift capital gains tax liability.
If you want peace of mind that you are preserving as much of your estate as possible, read below for an introduction to some options available when you work with a high net worth estate planning attorney who has experienced helping to reduce estate tax for high asset clients.
Charitable Giving as a High Asset Tax Planning Strategy
Charitable giving can further your philanthropic interests and also provide significant tax benefits. It involves donating part of your wealth to qualifying charitable organization in a way that defers or reduces your tax burden. Following are some examples of charitable giving that include an element of high net worth tax planning options:
- Charitable lead trusts;
- Charitable remainder trusts;
- Donor-advised funds (DAFs);
- Pooled income funds;
- Charitable gift annuities; and
- Family foundations.
When thoughtfully planned, these charitable giving vehicles can reduce the estate tax burden and, in some cases, income tax and capital gains tax burdens as well.
Transferring Wealth to a Family Limited Partnership or Limited Liability Corporation family limited partnership (LP) or limited liability company (LLC) is another high net worth tax planning option. When you transfer ownership in assets to another entity, your ownership becomes limited, entitling you to a valuation discount. Upon your death, your interest in the entity transfers to your heirs at a discounted value, which could save them taxes. To the extent you retain an interest in assets transferred in this way, you also have the option to maintain some measure of its control.
Federal Estate Tax Strategies
Upon the death of a high net worth individual, ownership of his or her assets transfers to heirs, either through probate or non-probate means. The estate must also file a tax return, at which time it must pay federal estate tax if owed. Every US citizen is subject to the federal estate tax, but there is an exemption for estates of lesser size. For individuals who die in 2021, estates with a gross value less than $11.7 million are exempt from federal estate tax (although the exemption will drop significantly in 2025 unless new legislation extends or changes it).
If you have a large estate, you need a high net worth estate planning attorney to develop strategies to minimize federal gift and estate taxes and make sure your wishes for your legacy are fulfilled. Even if you have a plan in place, laws change, which can also complicate matters. A high net worth estate planning attorney who is well-versed in the area of high asset estate planning can help you learn more about potential tax liability and potential tax savings.
If you would like to know more about high net worth tax planning or high asset estate planning, consult Anna M. Price, an experienced West Virginia high net worth estate planning attorney at Jenkins Fenstermaker, PLLC. Anna is a WV wealth planning attorney who can help WV, KY, and OH residents figure out federal estate tax strategies. Contact Anna by calling (304) 523-2100 or by completing the firm’s online contact form.