Legacy wealth planning is a more advanced form of estate planning. People who have accumulated a great deal of wealth have concerns that others do not. As a result, these individuals are typically going to employ strategies that protect assets and preserve wealth for the benefit of succeeding generations.
If you are interested in legacy wealth planning you will definitely want to take steps to gain estate tax efficiency. In 2013, we have a $5.25 million estate tax exclusion. The top rate of the tax this year is 40%, and these parameters are supposedly going to remain in place into the foreseeable future. However, you should always be alert because legislative measures could change the parameters, and as we all know budget negotiations are contentious.
There are various different ways to position your assets in an effort to mitigate your federal estate tax exposure. One possibility would be to convey assets into a generation-skipping trust.
Imagine the erosion that can take place as wealth that you have transferred to your children is being passed down again and again. Many people feel as though even one imposition of the estate tax is not fair because your estate is comprised of assets that you have remaining after you paid taxes all your life. Be this as it may, the estate tax can continually be applied as each generation leaves behind wealth for the next.
The generation-skipping trust is a legacy wealth planning solution because the next generation, your children, can benefit from the assets that have been conveyed into the trust throughout their lives. However, they don’t actually own the resources. The beneficiaries are your grandchildren. This is where the “generation-skipping” comes in.
The transfer of assets to your grandchildren would be subject to the generation-skipping transfer tax. As mentioned above your children could benefit from the resources in the trust. Both generations utilized trust assets, but there was only one imposition of a federal transfer tax.
Legacy wealth planning can also include asset protection. If you are concerned about litigants, creditors, or former spouses you could take steps to position your assets in a manner that cordons them off from attachment.
Philanthropy can also be important for many who are engaged in legacy wealth planning. There are obvious personal benefits that can be gained through acts of giving. However, you can also gain some tax advantages if you give to charitable causes in an intelligent manner.
In fact, under certain circumstances charitable lead trusts can be very beneficial for high net worth individuals looking to transfer assets.
If you are interested in legacy wealth planning we invite you to contact our firm to request a free consultation. We can be reached by phone at 317-684-1100, and you can also contact us through this website.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.