Estate Planning for the Wealthy, High Net Worth as well as Retired with Assets

Text Size:

Advanced Estate Planning for Sophisticated, Wealthy Estates

Planning for estate and gift taxes can be a challenge, especially when the thresholds for tax exemptions guidelines between the federal government and Massachusetts differ and when the laws keep changing. At the Law Offices of Michael T. Baker, we have the experience in helping high net worth individuals and trusts develop complete estate plans which consider the ever-changing climate for estate taxes and gift taxes.

Estate Plans for Couples and Individuals with $1 Million and Greater in Assets

For people with estates that are above the federal and state estate tax exemption amounts, effective tax and asset protection strategies for the entire estate (the total value of real estate holdings, 401(k), retirement accounts, investments, life insurance and other assets) need to be developed. In 2009, the estate of a married couple worth $7,000,000 could pay up to $1,750,000 in unnecessary estate taxes. Under current law the same $7,000,000 estate in the year 2013, could pay approximately $3,000,000 in estate taxes, while the estate of a married couple worth $2,000,000 could be subject to $500,000 in taxes in the same year. Seem excessive? We can work with you to create a complete estate plan to minimize your future estate liability, so you leave more of your life savings to heirs or charities, and not the government.

See the chart below for the Massachusetts estate tax and federal estate tax thresholds or exemption amounts.

Capital Gains Taxes and Lifetime Gifting Strategies

Even for moderate estates, a gift of $500,000 (a residence for example) during your lifetime could subject a beneficiary or beneficiaries to $100,000 in capital gains taxes, assuming a 20 percent combined federal and state tax rate. Depending on the value of the total estate, this same property left to someone at death may not be subject to any estate or capital gain taxes.

Other Tax Planning & Asset Protection Opportunities: FLPs, LLCs & Charities

Family Limited Partnerships (FLPs) and Limited Liability Companies (LLCs)can be useful for estate tax planning purposes, as well as asset protection purposes, particularly for clients with real property, business holdings and a high net worth. These entities can also be effective in providing a mechanism to gradually transfer not only property or business interests, but also the management and related responsibilities of such wealth. By establishing a FLP or LLC, clients can benefit from certain estate tax discounts, which are available through a properly established and maintained FLP or LLC. Like other entities, the effectiveness of an FLP and LLC is related to its intent and purpose, as well as, to its proper maintenance. For more on business structures and entities, click here.

Charitable Trusts for Reducing Capital Gains, Gift, Estate Taxes

With charitable planning, substantial tax benefits can be obtained by properly planning with charitable entities including Charitable Remainder Trusts, Charitable Lead Trusts, and Foundations. If you are charitably inclined and you own assets which have highly appreciated or have a large net worth, you may benefit by creating a charitable trust. These techniques can assist in reducing capital gains, gift and/or estate taxes.