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Legacy and Estate Planning with a High Net Worth

 

by Kent E. Irwin

 

 

This article will further the discussion of legacy planning continued from the previous article, to address the additional concerns and needs those with high net worth may have, and to provide you a starting point for beginning the process.

This is the second in a series of four articles on legacy planning, please read all of them.

Planning Your Legacy and Estate                                        Philanthropic Charitable Legacy Planning

Legacy and Estate Planning with a High Net Worth        Preparing for Meeting with an Attorney

 

 

 

 

History of Estate Planning: Death and Taxes

 

 

As mentioned in the prior article, estate planning used to serve only the ultra wealthy, a very small percent of the population.  Since WWII, the demographics of our country have changed. Today there are more millionaires than ever before as a result of favorable stock market returns, real estate appreciation, accumulations in IRAs and 401(k)s, and larger family incomes. In addition, the largest transfer of wealth ever seen—estimated to be in the tens of trillions of dollars—is due to occur over the next 30 years.

The emphasis used to be on death tax planning because the Federal Estate Tax taxed estates larger than $500,000 to $1,000,000 over 50%. Today’s exclusion amount is larger, and the maximum rate has come down some; however, the future is uncertain and will change depending on politics.

Therefore, for the most part, legacy planning was estate planning, and it focused on:

 

 

Prior Emphasis of Estate Planning

Table 1

Primary Issues

Secondary Issues

Post death

Blended family issues: “my, our and your children,” and new spouse

Minimization of 50%+ estate tax

Wealth transfer to successive generations

Complexities of business issues

Illiquid real estate and business assets

Privacy & Creditor protection

Life insurance for taxes and liquidity

Some charitable planning

 

 

 

 

 

Many attorneys feel that too many of their clients fail to put estate plans into action because of the following reasons:

 

 

Reasons for Not Planning

Table 2

“Death and taxes” is perceived as negative, and negative consequences don’t always provide ample motivation

Concerned that large sums of money may hurt their children more than help them

Avoidance: paying fees or attorney

Procrastination

Perceived loss of control prior to death

 

 

 

 

 

 

Legacy Planning Today: Legacy Centered

 

 

What is a legacy?  A legacy is what you want to be known for today and after you are gone.  Someone might say: “This again is a negative, planning for when I am dead!”  This could not be further from the truth.  You create your legacy by how you manage your financial affairs and how you live your life now.

How do you create a positive living legacy?  You probably already do it; you create it by demonstrating your beliefs and values:

·         By how you give

·         With your family and friends

·         In the leadership roles where you serve

·         Through your current or future career pursuits

·         In the positive contributions you make to the world

·         How you transfer your positive values and beliefs to others 

·         In how you live every aspect of your life

·         In the goals that your have for the future, re-assessment of current legacy, and creating plans to make  changes

Creating a legacy plan is so much more than estate planning.  It involves creating plans centered on the things you value most, the beliefs you hold, the people you love, and passing many of your beliefs and values to successive generations.

A legacy plan is a journey of rediscovery that many people go through when they hit mid-life, perhaps an exciting new chapter in your life.

Legacy planning is focused on your goals, needs and concerns, not the consequences of not planning.

Legacy planning is not focused on all of the intricacies and complexities of estate planning.  That is why for the purpose of this article the finer details of estate taxes, features and benefits of specific trusts, methods of transferring businesses and techniques to minimize taxes have not been discussed.

 

 

 

 

 

High net worth people today want a plan that will do many things.

 

 

Client Centered Legacy Planning Concerns

Table 3

Maintain some control

Teach and transfer values to next generation

Flexible to change

Personal passions

Philanthropic concerns

Provide for financial, emotional, professional, and legal needs of surviving spouses & children

Maximize and control wealth for their long life span

Gifting to family members while they are alive, so that they can transfer wealth in a way that helps rather than hinders the individual

Transfer business (possibly to a family member) in a tax- and cost-effective way

Privacy, creditor protection, and ongoing professional management

 

 

 

 

 

The Cost of Not Planning

 

 

If you don’t plan, you must be aware that you or your family will face many consequences of your failure to plan:

·         You or your estate will over pay taxes, both income and estate

·         Assets will not pass equitably or as you intended

·         Your business transfers may be very messy

·         You will miss out on taking advantage of money- and tax-savings devices, because they will be lost if not   done in a certain time period

·         Your kids may fight over money

·         Attorney fees will be much higher than had you planned

·         Your favorite charities will not receive what you intended

·         Children may inherit money in such a way that might spoil them

 

 

 

 

 

Summary

 

 

Legacy planning is a process to put into action with your financial and legal advisors. Many legal, accounting and financial firms go the extra step by providing coaching, self exploration, and even individual and family workshops.  The planning process is an opportunity to dream new dreams. The planning profession is privileged to witness and assist clients through this process of transforming the completion of previous successes into exciting new and satisfying ventures.

 

 

 

 

 

 

Kent E. Irwin is CEO and founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . For more information about eFinplan, go to the website efinplan.com.

 

 

 

 

 

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