Protecting Your Estate: A Guide to Estate Tax Planning for High-Net-Worth Individuals

Estate planning should be a priority for every adult no matter their personal and financial background. There are so many tools that any individual can use to benefit their loved ones after they pass, or benefit themselves while they’re still alive and no longer able to care for themselves. Although not every family or individual will need each available tool, estate planning for high-net-worth individuals requires a deeper level of understanding to save on taxes and avoid probate.

Taxes Come In Many Forms

For many individuals, wherever they started their journey, they commonly don’t want to spend a single penny of their hard-earned money on the administrative costs of probate or inheritance tax. These added costs when transferring assets after death can place a significant financial burden on your beneficiaries. Building an incredible nest egg without certain protections means it will crack before it gets to your intended loved one. For example, federal and state estate tax laws may take a percentage of the assets as a form of estate tax. 

In Washington, the estate tax applies to estates worth $2.193 million or more. Estate tax rates in Washington state are progressive and range from 10% to 20%, whereas Oregon has a threshold of just over $1 million, and the federal threshold is close to $12 million. That means that if your estate is valued just above $1 million, but under the federal threshold, then your beneficiaries will owe a graduated estate tax to Oregon. If your Oregon-based estate is above the federal threshold, your beneficiaries will owe estate taxes to both Oregon and the federal government. The higher the value of your estate, the higher the tax percentage becomes. 

Estate Planning Strategies

The end-goal for many hard-working and high-net-worth individuals is to give their families the benefit of enjoying the fruits of their labor even after they’re no longer physically there to provide for them. Creating comprehensive and effective estate plans works well for anyone regardless of their net worth. Here are some examples of ways to minimize estate tax liability and maximize the amount left to your heirs:

  • Trusts: Trusts come in many forms, prime examples of which include revocable and irrevocable trusts. Instead of bequeathing a large sum of money or assets to individuals, they can be protected within a trust and heirs can be outlined as beneficiaries. There are several ways to structure trusts, but it’s a common example of how to minimize estate tax liability. 
  • Gifting: Gift funds are a way to reduce the overall size of an estate, and transfer wealth to individuals or entities without fear of being taxed. This is still somewhat complicated as there is a maximum amount each individual can receive each year, and there is a lifetime limit on untaxable gifting that is subject to change with evolving policy. 
  • Family Limited Partnership (FLP): This is used in situations where high-net-worth families have substantial assets like investment properties. It is sometimes advantageous to create an FLP to reduce estate taxes and protect assets under the FLP.

These are just a few primary examples of common estate tools that can be used to reduce tax liabilities for beneficiaries. It’s important to note that a comprehensive estate plan may include a combination of estate planning tools to best suit the needs of the estate. Working with an estate planning firm with a team that is experienced in handling the legal needs of high-net-worth estates is the best way to maximize the value of your estate without compromising. Contact White Oak Wills & Trusts to schedule a consultation today at ​​(503) 928-8664.

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White Oak Wills & Trusts, LLC

At White Oak Wills, we believe that everyone deserves a high-quality estate plan that will meet their unique needs. Our team has years of experience working with families to create personalized plans that take into account their goals and concerns for the future. Whether you need a simple will or a comprehensive plan that includes powers of attorney, guardianships, and trusts, our team can help you develop a plan that aligns with your goals and ensures that your loved ones will be well taken care of.

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