6 Ways the Wealthy Build an Estate Plan
Written by
Yaël Bizouati-Kennedy
Edited by
Cory Dudak
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Estate planning is a crucial part of building generational wealth and creating a legacy. While it takes careful consideration, time and a long-term vision, it can also be very complicated and overwhelming.
Estate plans, while common, also have a lot of misconceptions around them — for instance, that they’re only truly necessary for the wealthy. Yet, many experts say that all you need is some kind of asset to establish one.
And there are some ways wealthy Americans build their estate plans that can not only resonate with anyone but can help you pass on more wealth.
What Do Those Who Have Extreme Wealth Do Differently in Planning?
The extremely wealthy understand that it takes more than just collecting financial products and that having a financial plan is key to achieving their goals, said Joshua Lieberman, certified financial planner (CFP) and partner of Lenox Advisors.
They take a step back and examine their overall financial picture before making decisions on investment management, risk management, accounting/taxation and estate planning, said Lieberman, adding that they engage with a financial planner early in the process of accumulating wealth.
“By doing so, they can design a strategy that ensures minimal tax implications and maximum growth potential for their assets,” he added.
What Steps Do They Take?
Tax Planning
Wealthy people’s estate planning is different from “everyone else” in that it is mostly tax-driven, said Jennifer Fulton, estate planning & probate attorney Schwartz Sladkus Reich Greenberg Atlas.
“Attorneys have devised tools that allow a client to work within the bounds of the law to save on estate taxes and income taxes,” Fulton said.
Use of Trusts
Wealthy individuals almost always use trusts as a key component of their estate plans.
“Unlike wills, trusts offer a shield of privacy keeping estate details confidential, unlike the public scrutiny often accompanying probate proceedings — where you end up if you only have a will,” said Ciara Lister, Esq., co-founder of estate planning firm Legado. “Trusts offer unparalleled flexibility, allowing creators to tailor plans to unique circumstances, whether addressing complex family dynamics or charitable objectives.”
In addition, by bypassing probate, trusts ensure smooth asset distribution that saves time and money. And most importantly, trusts grant creators precise control over asset distribution, ensuring that their wishes are faithfully executed, she said.
Leveraging Life Insurance
Life insurance can also be a valuable tool in estate planning for the wealthy, as it can provide money to cover estate taxes and other expenses, Lister said.
“Beyond providing liquidity, it serves as a strategic tool to equalize inheritances among heirs, ensuring fairness and harmony within the family,” she said, adding that it can also protect the value of assets being passed on, particularly those that may be difficult to sell quickly without incurring losses.
Assembling a Team
Another step the wealthy take to build their estate planning is forming a team, experts said.
“When advising a client on creating their estate plan, I stress the importance of assembling a team of professionals to help navigate the complexities of the process successfully,” said Melissa Murphy Pavone, CFP, certified divorce financial analyst (CDFA) and director of investments at Oppenheimer & Co.
By establishing a team — which can include a CFP, a CPA and an estate planning attorney — individuals benefit from a comprehensive and coordinated approach.
“Together the team of professionals will address not only the legal, tax and financial considerations, but ultimately optimize the outcome for the client’s financial future. In addition, they will help establish a legacy,” she said.
Philanthropic Strategies
There are also many philanthropic strategies and advanced tax planning involved when doing proper estate planning for a wealthy family.
“Lots of times, this looks like gifting assets to family members or utilizing the lifetime estate and gift tax exemption,” said Samuel Deane, financial advisor, Trust & Will.
According to Deane, although some of these strategies make the most sense for high-net-worth individuals, the general public can use some of these in a more approachable way.
“For example, by leveraging a platform like Trust & Will, anyone can set up a revocable trust to confidently pass their assets to the next generation or minimize taxes,” he said.
Getting Organized
Another step they take — and that anyone can follow — is to stay organized.
“You do not have to be extremely wealthy to do this. All you need is a full list of your accounts, insurance policies, tax documents and estate planning documents,” Lieberman said.
As he further argued, by investing the time to get organized, you will be able to make financial decisions more quickly and your estate trustees will be able to follow your wishes as they were intended.
“This means that your loved ones will not have to make difficult decisions without all the information they need,” he said.
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