High Net Worth Estate Planning

Wealth Management and Tax-Related Services: The Inevitable Link

April 30, 2024 | by Braverman Law Group

The link between wealth management and tax-related services is strong and growing stronger every year. For those who are either building an estate plan, making decisions about yearly gifts, establishing trusts, or partaking in special needs planning, it can be crucial to think about how yearly taxes will change based on the structure of your assets. With April 15 having recently come and gone, it is natural to feel like you may have been rushed into filing your taxes or that you did not have the chance to include everything you intended to include.

On today’s blog, we cover some important connections between the two industries, as well as what you can do if you feel like you need more time on your taxes. As always, this blog represents only a portion of what clients should know about the overlap between wealth management and tax-related services, and it is never a bad idea to speak with an experienced attorney that can help you navigate both worlds as seamlessly as possible.

Filing for an Extension

If you are in the process of starting to prepare your estate plan, do not hesitate to request a tax extension. During tax season, there is a common misconception that requesting an extension leads to an increased audit risk, but this is not the case. Instead, extensions can offer much-needed relief to those who are taking time to get their affairs in order. For those who will end up filing differently depending on the structure of their estate plan, it can be well worth it to ask the IRS for more time to file. Additionally, creating and finalizing an estate plan can take many months, and it is better to participate in the process thoroughly and carefully, so as not to skip any key steps in drafting your plan.

High Net Worth Estate Planning in Colorado

August 15, 2022 | by Braverman Law Group

Estate planning can seem complicated at any income level. Considering your assets, thinking through how you want those assets distributed, choosing guardians for your children, and selecting executors, trustees, and other fiduciaries can all take time and money, especially when done without the guidance of a skilled estate planning attorney. For high net worth individuals, though, this can be even more difficult with more assets of varied type to consider. Another issue high net worth individuals, who generally have more than $1 million in liquid assets, have to carefully consider is the impact of taxes on their estates. Taxes can limit the amount you ultimately bequeath to your beneficiaries. An attorney will know the ever-changing wealth and estate tax landscape and help you avoid taking a big hit when the time comes.

Wealth Transfer Taxes

In addition to the more commonly known income taxes, there are three types of taxes to consider when estate planning. These types of taxes are collectively known as wealth transfer taxes and include gift taxes, estate taxes, and generation-skipping taxes. These can all be minimized or avoided through creative planning and the use of trusts.

Gift taxes are taxes paid by a person who transfers assets to another person without receiving something in return and are quite common. There are federal gift taxes that range from 18% to 40%, depending on the amount of the gift, and some states impose gift taxes as well.

Advanced Estate Planning Strategies

July 30, 2022 | by Braverman Law Group

For many people, estate planning can seem intimidating but is ultimately relatively simple. Everyone needs an estate plan, but not everyone needs special arrangements to save on estate taxes or plan for business succession. Individuals and families who do need these more complex strategies may not know where to start. Below are a few advanced estate planning strategies. Before deciding a strategy is right for you, contact an experienced estate planning attorney to discuss your options and your unique situation. An attorney can recommend the best course of action and make sure you understand every option on the table.

Generation-Skipping, Dynasty, and Grandchildren’s Trusts

Many transfers of wealth between family members can incur taxes that should be considered. However, there are several generation-skipping trusts and strategies that can be used to distribute assets to the younger generation without depleting the estate with hefty federal and state taxes. A generation-skipping trust, for example, allows individuals to leave $1 million to their grandchildren, great-grandchildren and beyond without incurring a transfer tax. The amount will remain available to the individual’s spouse and the individual’s children as long as they are alive. A dynasty trust is similar to a generation-skipping trust, but lasts for over two generations. Finally, individuals can leave up to $10,000 each year to any other individuals, including grandchildren and great-grandchildren, without incurring gift taxes or other wealth transfer taxes. These gifts can be made to a trust to ensure younger generations are not left with large sums of money they cannot yet manage.

Special Arrangements for Businesses

Business owners may also take advantage of more advanced estate planning strategies. For example, business owners may begin to give their business interests to their children or beneficiaries to avoid estate taxes on the business. A way to do this without ceding control of the business is to issue non-voting stock to family members.

How High Net Worth Coloradans Conduct Estate Planning

March 31, 2022 | by Braverman Law Group

Because everyone is different, they have unique estate planning needs. For some people, this means prioritizing savings for retirement, whereas for others, it may mean planning how they would like end-of-life care handled. For ultra-high net worth individuals, their primary estate planning goal is protecting their current assets for future generations. Ultra-high net worth individuals are those with over $30 million in net worth. Because of this, their estate planning strategies may be different from other individuals. Below are some estate planning strategies that ultra-high net worth individuals can utilize to maximize their wealth for future generations.

Splitting Family Income

Splitting family income can assist ultra-high net worth individuals in mitigating their estate tax liability—one of the primary estate planning goals for these people. The American tax system is based on the idea that individuals who earn more pay higher taxes. Because of this, their estate tends to be larger—meaning, their estate will have to pay an estate tax before assets are distributed amongst beneficiaries. By dividing income among other lower-income earners in the family, the family’s tax burden will be reduced. This reduction will be seen both yearly through income taxes and when a person passes away in their estate tax liability.

Planning for Business Succession and Instilling Financial Responsibility

Many ultra-high net worth families have accumulated most of their wealth through owning a business. For those families who this is true, they should start taking steps now to plan for the future of the business. This may include planning for who will take over the business in the future, discussing the transition, and giving them the ability to ease into a larger role in the corporation over time. Planning for a business’s future can allow owners to know that the business will be in capable hands, even after they pass away. While this may not seem like an estate planning issue, attorneys can advise clients on how to ensure a smoother transition and how to incorporate the business success into their estate planning documents.

Estate Planning Strategies for Colorado High Net Worth Families

March 17, 2022 | by Braverman Law Group

Estate planning strategies greatly vary depending on many factors. These include family structure, health needs, and the amount of assets. Because of this, high net worth families have unique needs and strategies they must utilize in the estate planning process. For example, most of the intentions of high net worth families focus more on protecting assets for future generations, rather than accumulating more wealth. Below are some strategies for high-net-worth families to incorporate into their estate plan—along with why these strategies are beneficial in the short and long term.

Gifting Assets—Both to Family Members and Charities

High net worth individuals can benefit from gifting some of their assets, so they can limit their estate size. Why individuals may not seem the inherent benefits in decreasing the estate size, it reduces the estate and gift tax liability after they pass away. To reduce the estate size—while still having enough to pass along significant assets to loved ones—high net worth individuals can gift up to $15,000 per year without having to pay a tax. So, individuals can gift assets to loved ones, that they would otherwise gift them in their will later, to reduce their tax liability now.

Similarly, it is important for high-net-worth individuals to remember that they can gift up to $11.7 million over their lifetime without having to pay a gift tax. Because of this high tax exemption, this gifting option is the most optimal strategy to reduce the estate size and minimize tax liability.