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.
Estate taxes are imposed on the estate itself when a person dies. Conversely, inheritance taxes are imposed on the person inheriting the funds. These taxes are collectively rare and are imposed federally on only very large estates—in excess of $12.06 million as of 2022—and most states do not impose these taxes.
Finally, generation-skipping transfer taxes incur when an individual or couple gives property or assets to a grandchild or great-grandchild. The exemption level is the same as that of estate and inheritance taxes or $12.06 million federally.
Another area of potential expense for high-net-worth individuals is probate costs. Probate, or the legal process that begins when someone dies that includes validating and administering a will, can be expensive and time-consuming. Large estates can come with higher stakes and more disputes, further driving up the time, money, and hassle expended by your loved ones. Trusts can be utilized to keep certain assets out of probate. There are many types of trusts available, including Spousal Lifetime Access Trusts (SLATs), revocable and irrevocable living trusts, and intentionally defective grantors trusts (IDGT). A skilled attorney can help determine the best way to deploy these trusts.
Contact a Boulder Estate Planning Attorney for Assistance
If you wish to maximize the value of your estate, you need an estate planning attorney who understands your unique needs. The Boulder-area attorneys at Braverman Law Group make it their goal to help you make the choices that work best for you and your loved ones. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.