Estate planning can seem confusing and daunting, especially for high-net-worth and ultra-high-net-worth individuals. How can you ensure that your estate goes to those you want: family members, friends, or charities of choice? What can you do to minimize disputes or lengthy court-supervised probate proceedings? How can you minimize estate taxes? While no two situations are alike, proactive planning can answer crucial questions and help ensure that an estate goes where intended, with the least amount of tax possible.
Planning with foundational documents can help minimize the impacts of estate tax, both state and federal, so that your inheritors receive more of your hard-earned estate. For example, a revocable living trust is a private legal document that directs the transfer of assets upon an individual’s death, avoiding probate. It’s revocable because the trust can be changed over time. The document also ensures that a trustee can be appointed to manage assets if an individual becomes incapacitated for any reason.
Another key benefit of planning ahead is that it can help direct responsible use of the assets because the documents can specify when and how successor beneficiaries receive their inheritance. For example, a revocable trust can lay out the stages in which children receive assets, helping them develop a sense of financial responsibility because portions of their inheritance are being distributed at various ages.
Life insurance is another important consideration. Proceeds from a life insurance policy can be used to accomplish various objectives, such as paying estate tax or bequeathing assets to successors. Importantly, life insurance proceeds may add to the net worth for estate tax calculations, so it is vital that clients plan for these assets in a way to help minimize taxes.
Who will manage your assets or make healthcare decisions if you’re not able to do it yourself? Consider some of the documents you might need:
Lifetime charitable giving can also provide important tax advantages for an estate due to the unique tax environment. Notably, individuals may transfer up to the federal estate tax exemption amount during their lifetimes up to and upon their deaths. Additionally, individuals may gift up to the gift tax exclusion amount to as many people as they choose without triggering the need to file a gift tax return. Currently, the estate tax exemption amount is $12.06 million ($24.12 million for couples), but the amount gets cut in half (adjusted for inflation) beginning in 2026 due to a provision in the Build Back Better bill. Either way, gifting over time can reduce the overall size of an estate and possibly reduce the amount owed in estate taxes.
If charitably inclined, an individual or couple can give to charities or organizations of their choice, donor advised fund, or a family foundation. The donations have tax benefits and reduce the overall estate, and thus reduce the tax liability.
A charitable remainder trust (CRT) is an irrevocable trust that can potentially reduce overall tax liability. The structure is unique in that the trust offers designated family members a stream of income for a specified period. At the end of the term, the remaining assets go to a charity of choice. Contributions to the trust can result in a partial tax deduction, based on the amount of assets that will go to the charity. In this way, a CRT can lower the estate tax burden, earn a tax deduction, and potentially lower any capital gains tax as well.
Revocable living trusts, charitable remainder trusts, and lifetime gifting are just a few of the nuanced approaches that can help in the estate planning process. Many other types of trust and tools exist today:
When it comes to estate planning, there’s no universal solution that can meet everyone’s needs. Each situation is different and requires careful analysis. The most suitable solutions often involve identifying the appropriate tools that make sense for the specific goals of a person, couple, or family. Our advisors, attorneys, and tax professionals are happy to discuss the options so you can determine what may be the right fit for your needs.
Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Ascend Group is a tradename owned by Mercer Global Advisors Inc. (Mercer Advisors). All services provided by Ascend Group financial planning and investment professionals are provided in their individual capacities as employees and/or investment advisor representatives of Mercer Advisors.
Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning document preparation and other legal advice are provided through Advanced Services Law Group, Inc.
Mercer Global Advisors has a related insurance agency. Mercer Advisors Insurance Services, LLC (MAIS) is a wholly owned subsidiary of Mercer Advisors Inc. Employees of Mercer Global Advisors serve as officers of MAIS. MAIS provides individual life, disability, long term care coverage, and property and casualty coverage through various insurance companies. For Mercer Global Advisors clients who wish to purchase insurance products, MAIS has entered into a non-exclusive referral agreement with Strategic Partner(s), where the Strategic Partner will provide necessary services relative to the marketing, placement, and servicing of the insurance products, including without limitation preparing and presenting illustrations, supporting the underwriting process, assisting with the completion and execution of applications, delivering policies, and servicing in-force business. MAIS and the Strategic Partner will be listed as “co-agents” on the policies. While Mercer Global Advisors does not receive a referral fee, MAIS and the Strategic Partner each receives a percentage of the commission revenue.
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