Important first steps in high-net-worth estate planning

On Behalf of | Apr 18, 2023 | Wills

As a general rule, financial planners consider you to be a high-net-worth individual if you have at least $1 million in liquid assets. Although Indiana does not have an estate tax, you still have multiple issues to address to preserve and protect your assets.

Protect your estate from your possible incapacitation

An accident or disease could leave you unable to manage your affairs or make decisions. To prevent your financial matters from falling into disarray, incapacitation planning is a basic element of a sound estate plan. When you are of sound mind, choose who will manage your finances and access your health records.

Legal tools to communicate your wishes in the event of incapacitation:

  • Durable power of attorney
  • Healthcare power of attorney
  • Advance directive regarding nature of medical care
  • Guardianship declaration

Understand the effect of gift taxes

You may be attracted to gift giving as a way to pass money to various heirs. As of 2023, you can give someone up to $17,000 per year as a gift.

However, the gifts that you give reduce the federal estate tax exemption. If you gave away $4 million in your later years, this would subtract from the current $12.92 million exemption for an individual. Your exemption would become $8.92 million, which could leave your estate owing estate taxes.

Choose a trustee carefully

High-net-worth people frequently use trusts to keep estates out of the public probate process. Trusts may also impose controls on how beneficiaries receive money.

A trust requires a trustee. If you are the trustee, you still need to appoint a successor trustee. Great care must be exercised when choosing an individual or institution as your trustee. Investigate a potential trustee’s integrity and record to ensure that you place your assets in reliable hands.