Many High-Net-Worth People Haven’t Taken Critical Estate-Planning Steps

More than one-third of individuals (38%) with a net worth over $1 million haven’t taken the basic steps necessary to secure their wealth in the event something happens to them, according to a 2015 CNBC Millionaire Survey.

It’s important to understand the potential negative consequences if you don’t take some basic steps to protect what you’ve earned through proper estate planning. It can be confusing and frustrating, and the laws have changed significantly over the years. For that reason, it’s important to have a trusted estate-planning advisor who can protect your wealth now from excessive taxation, but also to ensure that it’s protected after your death.
Protect your wealth by consulting an advisor who knows estate planning.

Get Documents in Order

More than just tax planning, estate planning means putting important instructions and decisions in writing. Without these legally binding documents, the battle over your estate and your assets could be messy and expensive for your heirs.

A last will and testament is perhaps the most important document to have, and while it can be uncomfortable to think about dying, taking steps to put your wishes in writing is essential for any high-net-worth individual. This document can also indicate a guardian and set up trusts for any minor children you have, which is essential for young families.

Two additional legal documents that everyone (but especially those with high net worth) should have are medical and financial powers of attorney (POA). A medical POA gives someone the power to make decisions about your care in the event you cannot. Most people designate a spouse, but you should also name someone else in the event your spouse cannot make those decisions.

A financial POA designates a person you choose to manage your finances and act on your behalf in the event you cannot.

Shielding Heirs From Taxes

Estate planning also means creating financial vehicles that can protect wealth from hefty estate taxes, such as trusts. While the current tax structure is such that a large amount of wealth can pass tax-free, it was not always so and—barring Congress making the 2017 Tax Cuts changes permanent—will not be again after 2026.  In the last ten years, the estate tax limit has been $1 million per person, to unlimited, to $5.5 million per person, to its current stop at $11.4 million per person.

While these can be valuable tools, it’s important to revisit your estate plan regularly with a trusted advisor, because changes in tax laws can impact the purpose behind your trust. In some cases, you may want to reverse decisions that made financial sense when you made them, but, due to changes in the laws, they would now have higher tax implications.

The Risks of Not Planning

Proper estate planning and regular review and updating takes time and might not seem like a high priority, but failing to do so can have significant consequences for your wealth after you are gone. Without proper protections in place, your heirs’ inheritance could be at risk from an angry ex-spouse, family members left out of the will, financial predators or even from the court system.

Estate planning for high-net-worth individuals is more than just hiring a financial advisor or filling out a power of attorney form you found online. For airtight legal protection, it involves a team that can include financial service professionals, accountants, attorneys and others as needed for your individual situation.

Talk to the team at Cantley Dietrich today if your net worth is over $1 million and you are in the 38% of people who haven’t taken important steps to protect your wealth.