Important COVID-19 Update: We offer free consultations via phone, video, or in-person. Here’s information about our process during the this time.

The Heritage Law Center, LLC Blog

Estate Planning for High-Net-Worth Individuals in Massachusetts

POSTED ON: May 17, 2022

Couple on boat

Everybody wants to protect the assets they have. After all, we’ve all worked very hard for them. As a high-net-worth individual, if you don’t protect your assets, a larger amount of money is at stake that could be lost to taxes and other costs like probate. If you use the right estate planning strategies, you can protect your assets for your family’s future.

The best estate planning for high-net-worth individuals uses techniques like these:

Qualified Personal Residence Trusts (QRPT)

Your home and vacation home are likely very valuable assets of your estate, so you need to protect them. A QRPT is an irrevocable trust that can help the homeowner/parent pass their property down to loved ones. You transfer the title of your home to the QPRT (an irrevocable trust), the QPRT freezes the value of the estate, and you can live in the house for a defined number of years. When that defined period ends, the beneficiaries become owners of the residence. You can still live in the property by renting it from the beneficiaries at a fair market value.

Benefits of a QRPT:

  • Tax bills for beneficiaries will be significantly lower following the owners’ death.
  • Since you no longer own the home during your lifetime, it’s protected from creditors.
  • You stay in control of the property as the trustee of the QPRT and retain all the income tax deductions associated with the property.
  • If you live longer than the term of the trust, the home and its appreciation are removed from your taxable estate.

If you die before the end of the defined period, the full value of the house will be included in your estate for estate tax purposes, which is what would have happened had you not established a QPRT.

Irrevocable Life Insurance Trust (ILIT)

Many Massachusetts families get life insurance policies to provide for their loved ones. The problem is that the death benefit from a life insurance policy could also be that one asset that triggers the Massachusetts estate tax—resulting in a portion of your money not getting to your loved ones.

An ILIT is a type of irrevocable trust that is specifically designed to hold and own life insurance policies. Once your attorney drafts the ILIT, you can transfer ownership of your life insurance policies to the trustee of the ILIT.

The top benefits of using an ILIT in estate planning for high-net-worth individuals:

  • There’s a savings on estate taxes. Estate taxes are based on the gross value of the estate, which may include life insurance policy benefits. However, when a life insurance policy is held in an irrevocable life insurance trust, the death benefit remains separate from the gross estate, and it’s protected from taxation.
  • The insurance policy benefits are protected from creditors; both those seeking compensation against the estate and those of any beneficiary. Creditors can’t access assets in the trust, but they can likely access assets once they are distributed to the beneficiary.

More benefits of an ILIT can be found in the blog 5 Reasons for an Irrevocable Life Insurance Trust.

AB Trust

Married A/B trusts (“bypass trusts”) permit spouses to combine their exemptions. When one spouse dies, their assets are transferred to an irrevocable trust rather than going directly to the surviving spouse. In some cases, the surviving spouse will receive income generated by the trust. This arrangement saves the heirs a possibly large estate tax when the second spouse dies.

You can find more information in our blog What is an AB Trust?

As a skilled Massachusetts estate planning attorney, I frequently create estate plans for high-net-worth individuals and families to minimize their potential tax liability and maximize the potential savings a good plan can give them. Contact us today for a free, no-obligation consultation.