While estate plans can be beneficial for individuals of various economic statuses, those with large estates may find estate planning to be particularly beneficial. Not only can it help ensure the wishes of the estate holder upon passing, but it also removes the confusion and burden for the estate holder’s family during what can be a hard time.
Whether you look to create an estate plan or revise one that you have in place, there are a few key elements to consider. Particularly if you have a high net worth estate, it would be beneficial to understand and avoid a few common mistakes.
Gifting versus inheriting
Some parties may believe they are doing their loved ones a favor by gifting appreciated assets to the intended benefactors. However, it could actually be more beneficial for the parties to simply inherit the assets. While gifting the assets ahead of time may help avoid the probate process, it can create other issues that cost quite a bit more. If the gift recipient decides to sell the asset, it may be subject to capital gains taxes, equal to any gains the asset amassed beyond the initial value of the asset at purchase.
Personal and legacy assets
With high net worth estates, it can be beneficial to intentionally designate assets as either personal or legacy assets. Since parties live off their personal assets, it would make sense to reduce risk on those assets. However, that is not necessarily the best choice for legacy assets; such assets may benefit from more high-risk/high-reward investments.
Some parties choose to intentionally exclude certain assets from their estate plans and make a verbal or unstated agreement for those assets to go to particular parties upon their passing. However, if the executor is aware of this, or participates in it, the executor is not upholding the mandates of the position.
Along with putting the right elements in place, ensuring proper execution is key. Therefore, you should take time to coordinate your estate plan between your appointed administrators if you have different parties overseeing the various aspects of your estate.