Protect Your Legacy: Don’t Fall For These Five High-Net-Worth Estate Planning Myths

Myth 1: I’m Too Young to Think about Estate Planning

Accidents and tragedies happen all the time, so the advantages of creating a strategic estate plan are not limited to older individuals. If you have accumulated significant wealth at a young age, you need a plan for distributing your assets if the unthinkable happens. Many estate planning tools, such as living revocable trusts, can be updated and changed throughout your life as your circumstances evolve, so starting early has only benefits and no drawbacks. When you create an estate plan earlier, you give yourself more time to learn and improve. But if you wait until the end of your life is imminent, you increase the risk of passing without an estate plan in place or dying with a subpar estate plan full of mistakes.

Myth 2: A Will Is Good Enough

A will is a popular estate planning tool, but it is not the best option for every scenario. A will can be effective in conjunction with other high-net-worth estate planning tools and strategies, such as a trust or family LLC, but a will alone cannot meet the estate planning needs of many high-net-worth families. Other critical estate planning tools, including powers of attorney and health-care directives, ensure management of your financial and medical affairs according to your wishes if you become incapacitated. Moreover, if you leave assets in a will, asset distribution will undergo a public probate court proceeding that can be costly, time-consuming, and emotionally taxing for your loved ones. Assets placed in a trust bypass probate court, meaning beneficiaries can receive the assets more efficiently, and the details can be handled more discreetly. 

Myth 3: Once I Establish My Estate Plan, I’m Done

Your financial situation and relationships will change over time, so in most cases, estate plans should not be static, unchanging arrangements. After you’ve created a plan, you need to implement that plan. For example, if you decide you will use a revocable living trust as part of your estate plan, you will need to create the trust, choose beneficiaries, choose a trustee, document any stipulations or conditions you want the trustee to follow when distributing the assets, and fund the trust with the assets you want to be distributed through it. You may need to make changes throughout your life, such as adding new assets and beneficiaries to the trust, to ensure the estate plan does not become outdated. Moreover, there may be new laws and guidelines regarding estate taxes, inheritance taxes, and other relevant financial policies during your lifetime, so you may need to update your estate plan strategies to ensure they remain legally compliant and tax- efficient.

Myth 4: Estate Taxes Won’t Affect My Family

Estate taxes may not affect everyone planning to leave an inheritance to their children, but for high-net-worth families who plan to leave a business, real estate, brokerage accounts, or other valuable assets, knowing  the most up-to-date estate tax guidelines is vital. As of 2023, the federal estate tax applies to estates worth more than $12.92 million. But even if your current net worth isn’t quite that large, keep in mind that appreciation and compound interest may increase the value of your estate dramatically over time. If you are a high earner in the prime of your career, you are still accumulating assets that will have decades to increase in value over your lifetime. Additionally, if you own a business or land, you may not be aware of the true market value of your estate. Your business or tangible assets such as land, machinery, or intellectual property, may be worth a lot more than you think. The current estate tax exemption law sunsets at the end of 2025, dropping to $7 million per person if no new legislation is passed, meaning that estate taxes will impact many more families whose estates were previously under the taxable threshold. Moreover, state-specific estate or inheritance taxes might also affect you or your beneficiaries, depending on the state in which you live. 

Myth 5: Estate Planning Is Too Complicated

It’s true that estate planning strategies can be complex, especially for high-net-worth individuals, but you don’t need to worry and should not give up. Help is available for those who recognize the importance of estate planning but feel overwhelmed or uncertain. The financial advisors at Business & Financial Strategies (BFS) make high-net-worth estate planning easy. They have extensive experience helping clients understand financial and estate planning strategies and make informed financial decisions. They can help you create a customized, comprehensive estate plan based on accurate financial information and the latest estate planning strategies so that you can be confident your assets will be efficiently distributed according to your wishes. Moreover, they can guide you toward strategies that will reduce the financial and emotional toll on your loved ones after your death.