4 smart estate planning moves for the wealthy


You want to keep as much wealth as possible in your family. You want to leave as large a legacy as possible for your heirs. But the journey from here to there requires careful planning to help avoid tax, probate and inheritance missteps that could lessen your legacy. The following are just a few savvy ways in which wealthy families successfully transfer more to the next generation:

1.  Keep rather than gift highly appreciated assets.

Of course, you want to see your children and heirs enjoying the fruits of the wealth you’ve amassed. But re-titling highly appreciated assets in the name of your heirs isn’t an efficient wealth transfer strategy. Why? Because when you gift a highly appreciated asset like real estate or stocks, the recipient receives the gift at its original cost basis (i.e., the original purchase price, adjusted for stock splits, dividends and return of capital distributions). Say you originally purchased a stock for $100,000 that’s now worth $500,000. Gifting that stock would subject the recipient to capital gains taxes on $400,000 if they sold it right away.

If the asset was inherited, however, the beneficiary gets a “step-up in basis” to the value of the asset at the time of the original owner’s death. Using the $100,000 stock purchase that’s now worth $500,000 example, if the shares are inherited and then immediately sold, the beneficiary would pay no capital gains. The difference can be tremendous.

2.  Be transparent about ALL your assets.

Successful families often have a considerable amount of wealth tied up in expensive personal valuables (e.g., artwork, antiques and jewelry). While it might be tempting to exclude those items from your will (assuming they’ll find their way into the homes of your beneficiaries outside of the probate process without incurring any transfer taxes), don’t do it. Otherwise, the trusted friend or family member you name as executor or co-executor of your estate could find themselves in serious legal trouble for failing to properly report your estate assets.

3.  Treat personal and legacy assets differently.

There’s a big difference between retiring with $2 million and hoping to have enough left over for a meaningful inheritance, and retiring with $10+ million knowing that you’ll be able to transfer a sizable legacy. In the first instance, gradually reducing overall portfolio risk as you approach and then enter retirement makes perfect sense.

But for larger estates, you’re essentially managing two separate asset pools—one for your personal use in retirement; and a second for your beneficiaries to inherit. Since the latter isn’t needed for income, you can afford more investment risk in an effort to generate returns. Even as you may be reducing the risk associated with your personal use assets.

4.  Coordinate the efforts of your advisors.

No matter how experienced, savvy and reliable your trusted advisors are, none of them will be as successful alone as they will be when working together in an integrated, cohesive way with open lines of communication. Your tax accountant and financial advisor should be talking about which investments to sell for tax loss harvesting purposes. Your attorney and financial advisor should be working together to ensure your estate plan addresses your needs and is efficiently implemented. Collaboration is the key to avoiding any mistakes down the road.

Interested in learning more about estate planning and wealth transfer? 

Talk to a Truist Wealth advisor.