People with high net worth should take steps to protect their assets during their lifetime and make arrangements for what happens to their wealth after they die. Your income and assets face various threats while you’re alive, but you can address those issues with savvy, high-net-worth estate planning.
A Massachusetts estate planning attorney can talk to you and help you craft the documents you need for your goals. To help you understand your options, here’s a quick guide for high-net-worth estate planning.
What You Can Do Now to Protect Yourself in the Future
A lifetime of hard work can get wiped out quickly without prudent measures taken in advance of the situation. Here are some of the threats to your wealth that you can deal with through estate planning:
If you become incapacitated due to a devastating illness or injury, someone will need to manage your finances so that your economic status doesn’t crumble. If you own a business, you need to make arrangements through a trust, durable power of attorney, or a combination of these papers, to determine who will run the company and take care of your income, bills, and investments. You should also designate someone to make your medical decisions in case you become unable to do so for yourself.
If done correctly, a trust can safeguard your assets from claims of creditors. You need to be careful about how and when you set up such trust, so in the future a judge doesn’t believe that your intention for setting up the trust was to defraud creditors.
Irrevocable trusts offer tax-shelter benefits that revocable trusts don’t. An irrevocable trust can’t be changed or dissolved after it’s created, but it can provide great protection for the assets in them. That’s because technically the assets in them don’t belong to you anymore; they belong to the trust. Revocable trusts plus tax-free gifting can also help you avoid estate taxes by optimizing available tax exemptions.
Marriage and divorce.
When he died in 2021, celebrity Larry King was in the process of divorcing his seventh wife. Reportedly, his net worth was around $144 million, but his estate was only $2 million because he had placed the bulk of his property into trusts. If you don’t make smart use of trusts, prenuptial agreements, and other measures, you can lose a significant portion of your wealth if you divorce. Your children could lose out on their inheritance if you remarry.
When one spouse needs to move into a nursing home and the other spouse will continue to live in the family home, the long-term care expenses can quickly erode the couple’s life savings and leave the “community spouse” (the one not living in the nursing home) struggling financially. Specialized trusts can prevent this situation and safeguard some income and assets for the community spouse.
These are but a few examples of the ways that prudent estate planning can protect you and your loved ones during your lifetime.
Plan for the Needs of Your Loved Ones
Estate planning can also help you cover the unique needs of your loved ones long after you’re gone. Some situations that might need attention include:
- If you have young children, you can make arrangements in a living trust for who will raise them, pay their living expenses, manage their money until they can do so for themselves, pay for college, and other concerns.
- You could set up a special needs trust for a child with a disability.
- A spendthrift trust can be useful if you have a loved one who has issues with money management, gambling, or addiction or might fall prey to “gold diggers.”
As an experienced Massachusetts estate planning attorney, I’ve worked with many high-net-worth clients to create an estate plan that meets their needs. Our team collaborates with your financial advisors and CPAs so you can be sure that the estate plan we create for you allows you to transfer the optimal amount of assets to your beneficiaries. Contact us today to schedule a confidential, no-cost consultation to discuss how we can help you with your high-net-worth estate planning.