How do I maximize the assets I can transfer during my life or upon my death to my beneficiaries?

There are a couple of potential areas that can reduce the size of your estate and, thus, affect the inheritance you leave behind.

Using a will alone to pass assets is often not the most effective vehicle for maximizing an inheritance for beneficiaries. Assets that are owned by a decedent in their own name will pass via the terms of the will but will be subject to the probate process. Probate can be an expensive and a time-consuming process that can incur significant legal fees and delays. By utilizing a revocable trust structure, clients can largely avoid the probate process and the associated expenses and delays. A revocable trust also provides additional benefits, including immediate succession of management during incapacity, a centralized vehicle for asset management, and a level of privacy unavailable when going through the probate system.

Asset Protection Planning

Another way to maximize your estate for your beneficiaries is by engaging in asset protection planning. Contrary to what many might believe, a revocable trust by itself will not provide any asset protection benefits. There are other options for protecting your assets from creditors available to clients who plan in advance. These include statutory exemptions such as a Florida homestead, assets owned via tenancy by the entireties, IRAs, annuities, and life insurance. Certain irrevocable trusts including irrevocable domestic asset protection trusts and offshore trusts can also be useful asset protection tools. Finally, multi-member entities designed appropriately can limit creditors to distributions made from the entities.

Not planning for estate taxes for higher-net-worth estates can also lead to a depletion of assets left for beneficiaries. In 2018, the estate tax exemption is expected to be around 11.2 million for individuals and 22.4 million for married couples. Amounts passed to beneficiaries above that threshold will be subject to a 40% estate tax. Higher-net-worth clients can mitigate the impact of the estate tax by engaging in gifting strategies and other estate planning techniques.

Income Tax Planning

Income tax planning is also an important component of any estate plan, large or small. These strategies may include making charitable bequests out of IRAs to avoid the inherent income tax and holding low basis assets until death to realize a step up in basis and avoid the income tax imposition on an immediate subsequent sale.

Additionally, utilizing insurance can be a very effective way of maximizing one's inheritance. Insurance is an important component of any estate plan because of the income replacement and liquidity benefits it provides, but it can also be a very effective vehicle for leveraging your existing assets to create a larger return for beneficiaries and charitable causes.