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Death and taxes may be inevitable, but a hefty bill for your heirs doesn’t have to be, according to estate planning experts who say strategies once reserved for the wealthy can benefit almost anyone.
While the ultra-rich have long employed sophisticated methods to preserve their wealth and minimize taxes, these same techniques can work effectively for those with more modest estates, providing peace of mind and financial security for the next generation.
“It’s a strategic game of chess played over decades,” explains Mark Bosler, an estate planning attorney in Troy, Michigan. “While the average person relies on a simple will, the well-to-do utilize a different playbook.”
Despite common misconceptions, federal estate taxes affect only a small percentage of Americans. Currently, federal estate taxes apply only to estates valued over $15 million. At the state level, just 16 states and the District of Columbia collect estate or inheritance taxes, generally targeting millionaires.
However, even when tax concerns aren’t pressing, poor planning can lead to significant headaches. Without proper preparation, estates can become entangled in probate court proceedings for years, draining resources through court fees and legal expenses.
A trust stands as the cornerstone of effective estate planning. While trusts have long been associated with the ultra-wealthy, they’re actually straightforward tools accessible to many. Though establishing a trust typically costs several thousand dollars in legal fees, the benefits often outweigh this initial investment, particularly for retirees with paid-off homes, retirement accounts, and investment portfolios.
“You are leaving what might have gone to your children or other loved ones to attorneys and the courts,” cautions Renee Fry, CEO of Gentreo, an online estate planner based in Quincy, Massachusetts. “Anywhere from 3 to 8% of an estate might be lost” to probate costs.
Beyond avoiding probate expenses, trusts offer additional advantages. They can shield estate details from public records, providing privacy for families during difficult times. Some people also use trusts strategically to protect assets should they eventually require nursing home care, potentially qualifying for Medicaid assistance rather than depleting savings.
Another powerful strategy employed by wealthy families involves the “step-up in basis” rule for inherited investments. This provision allows heirs to recalculate the tax basis of inherited assets based on their value at the time of inheritance, not when they were purchased.
Benjamin Trujillo, a partner with wealth advisory firm Moneta in St. Louis, calls it “like a magic trick” that’s completely legal. “Wealth transfer looks like smoke and mirrors,” Trujillo explains. “Assets like stocks can quietly grow for decades and, when they’re inherited, the tax bill often disappears.”
For example, if someone invested $1,200 in Nvidia stock when it began trading in 1999 at $12 per share, that investment could be worth over $9 million today. An heir who inherits these shares could sell them with minimal tax liability because the gains would be calculated from the date of inheritance, not the original purchase date.
While lawmakers have occasionally proposed limiting this provision, it remains intact, making it one of the most powerful tools for building generational wealth. The step-up rule applies not just to stocks but also to other appreciating assets like real estate, artwork, and collectibles.
Beyond trusts and tax strategies, experts emphasize the importance of properly designating beneficiaries on financial accounts. This simple step, often overlooked, can significantly streamline the transfer of assets after death.
“One of the easiest ways to transfer assets hassle-free,” says Allison Harrison, an estate planning attorney in Columbus, Ohio, is to ensure beneficiary designations are current on all accounts. These designations typically supersede instructions in a will, making it crucial to review and update them regularly, especially after major life changes like marriage, divorce, or the birth of children.
Estate planning experts note that this attention to detail is what distinguishes families who successfully preserve and transfer wealth from those who don’t. As Fry summarizes, “Wealthy families plan. They don’t leave assets and decisions unprotected.”
By adopting some of these strategies—establishing trusts, understanding tax advantages for inherited investments, and maintaining current beneficiary designations—even those with modest estates can ensure their assets transfer efficiently to the next generation, just as the wealthy have done for decades.
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11 Comments
Interesting insights on how the wealthy leverage estate planning to preserve their wealth. Seems like a lot of sophisticated techniques are available, even for those with more modest means. I wonder if these strategies can really benefit the average person or if they’re still skewed towards the ultra-rich.
Good point. The article suggests these tactics can work for the average person, but the details and complexities involved may make it challenging to implement effectively without professional guidance.
As someone interested in mining and commodities, I’m curious to see if this article touches on how the wealthy manage their investments in these sectors. Effective wealth transfer is crucial for mining companies and related equities to maintain stability and continuity.
That’s a good observation. The article doesn’t seem to cover that angle specifically, but it would be interesting to understand how estate planning factors into the ownership and succession of mining/commodity businesses and assets.
This is an important topic, especially given the concentration of wealth we’ve seen in recent decades. While the ultra-wealthy have long exploited sophisticated strategies, it’s good to see more accessible options becoming available. Curious to learn more about the nuances and tradeoffs involved.
This is an interesting look at how the rich maintain control and pass on their wealth. As someone invested in mining and commodities, I’m curious to see if there are any industry-specific considerations or approaches the article doesn’t cover. The continuity and stability of these businesses is crucial, so understanding ownership transfer strategies would be valuable.
Agreed. The article focuses on general estate planning, but the unique dynamics of capital-intensive industries like mining likely require specialized techniques. It would be helpful to see more insights on how the wealthy manage their investments in these sectors for long-term sustainability.
The article highlights some useful estate planning techniques, but I’m a bit skeptical about how practical they are for the average person. Navigating complex legal and tax considerations requires significant resources and expertise. I wonder if simpler options like wills and trusts may still be the most accessible route for most people.
As an investor in mining and energy stocks, I’m always interested in understanding how ownership and control is passed down within those industries. This article provides some high-level insights, but I’d love to see more specifics on how the wealthy manage their investments in these sectors for long-term sustainability.
Good point. The article is focused on general estate planning, but the dynamics within capital-intensive industries like mining and energy likely require specialized strategies. Understanding those nuances would be valuable for investors in those spaces.
While the estate planning techniques discussed may work for the wealthy, I’m not convinced they’re truly accessible for the average person. The article suggests these strategies can benefit ‘almost anyone,’ but the level of complexity and professional guidance required could be a barrier. More research is needed on practical, low-cost options for everyday individuals.