With a top federal estate tax rate of 40%, high-net-worth individuals have a good reason to think about wealth transfer long before an estate is settled.
You also have to decide when it makes sense to gift assets, how a business or other closely held interests will change hands, and how to provide for future generations. The decisions can become even more important when your estate includes appreciated assets or holdings outside the U.S.
In this blog, we’ll walk through the key high net worth estate planning strategies, the taxes that can shape those decisions, and common gaps to look for in your plan.
What High Net Worth Estate Planning Needs to Accomplish
Once you know what makes your estate more complex, the next question is what you want the plan to accomplish. A coordinated estate plan should give you a clear path for transferring wealth while making sure the pieces of the plan work together.
That means focusing on outcomes such as:
- Putting your wishes into practice: Make sure your assets ultimately pass to the people or organizations you choose, at the time and in the way you intend.
- Keeping enough flexibility and control: Decide what you want to transfer during your lifetime, what you want to retain, and where trusts or other structures may give you more control over future distributions.
- Avoiding forced financial decisions: Plan for the cash needed to cover taxes, debts, expenses, and other obligations so you don’t have to sell valuable or illiquid assets unexpectedly.
- Keeping ownership and beneficiary decisions aligned: Coordinate trusts, beneficiary designations, account ownership, business interests, and other assets so they support the same estate plan.
- Making the plan workable over time: Build in regular reviews so the plan can keep pace with changes in your wealth, business, family circumstances, and tax laws.
These outcomes can help you determine which trust and estate planning strategies actually make sense for your situation.
Core Tax Considerations in High Net Worth Estate Planning
Tax planning can shape some of the biggest decisions in your estate plan, including when to transfer an asset, which assets to give away, and how much ultimately reaches your beneficiaries.
Here are the main tax considerations to work through:
Federal Estate and Gift Tax
Estate and gift taxes share a lifetime exemption. When you make taxable gifts during your lifetime, the amount generally counts toward that exemption and reduces the portion that remains available at death.
You can also give up to $19,000 per recipient each year under the annual gift tax exclusion without using your lifetime exemption. Gifts above that amount may need to be reported and can use part of the lifetime exemption.
Generation-Skipping Transfer Tax
If you transfer wealth to grandchildren or later generations, generation-skipping transfer (GST) tax may apply in addition to estate or gift tax. It generally covers transfers to someone two or more generations below you.
GST tax has its own lifetime exemption. Planning how you use that exemption is especially important for trusts designed to hold and pass wealth across multiple generations.
Income Tax and Basis
Basis can make a big difference when you’re deciding whether to gift an appreciated asset during your lifetime.
An appreciated asset generally keeps your original basis when you gift it, which can mean a larger taxable gain for the recipient when they sell it. If the asset passes at death, its basis is generally reset to its fair market value at that time.
That means a gift that reduces your taxable estate could leave the recipient with a larger capital gain later. Consider both sides of the tax equation before deciding when to transfer the asset.
State and International Taxes
Federal taxes aren’t the only ones that may apply. Depending on where you live or own property, your estate could also be subject to state estate or inheritance tax.
If you have assets outside the U.S., they need separate attention. A foreign property, investment, or business interest may be taxed in the U.S., the country where the asset is held, or both. In such cases, you may need to consider different tax, reporting, and transfer rules as part of the estate plan.
High Net Worth Estate Planning Strategies
The right estate planning strategies depend on what you own, how quickly those assets may appreciate, how much liquidity you need to retain, and when and how you want to transfer wealth to your beneficiaries.
Here are some of the main strategies to consider:
1. Use Lifetime Gifting
Lifetime gifting allows you to transfer assets to your beneficiaries during your lifetime, which can reduce the amount of wealth that remains in your taxable estate. You can do this through annual exclusion gifts or make larger gifts that use part of your lifetime gift and estate tax exemption.
This can be particularly useful for assets you expect to appreciate. If you transfer an asset today, its future growth generally takes place outside your estate. But don’t base the decision on estate tax alone. You also need to consider the asset’s basis, how much of your exemption the gift will use, and whether you’ll need the asset or its income later.
2. Consider Trust-Based Strategies
Trusts can help you control how wealth is transferred, but the right structure depends on the assets involved and how much access or control you want to retain.
Some options include:
- Irrevocable trusts: May remove assets and future appreciation from your taxable estate, but generally require giving up some control over those assets.
- Grantor Retained Annuity Trusts (GRATs): Can transfer future appreciation to beneficiaries while providing you with annuity payments for a set period, making timing and expected asset growth important.
- Spousal Lifetime Access Trusts (SLATs): Allow one spouse to transfer assets to a trust for the benefit of the other spouse and other beneficiaries, providing some indirect access while giving up direct ownership.
The right choice depends on what you’re transferring, your goals for the assets, and how much access you may need later.
3. Plan for Business Succession
If a private business makes up a significant part of your wealth, start by deciding what you want to happen to it. You may want to transfer ownership to the next generation, keep management and ownership separate, or prepare for a future sale.
From there, you can plan when and how ownership will transfer, how the business will be valued, and whether tools such as buy-sell agreements or gradual ownership transfers make sense.
The strategy should also account for business value, liquidity, control, governance, and continuity so the transition works for both your estate and the company.
4. Get Closely Held Assets Valued
A publicly traded stock has a market price you can look up. A family business or private company interest doesn’t.
Before gifting or transferring one of these interests, you need a defensible value. The size of the ownership interest, voting rights, marketability, and other factors can all affect what it’s worth.
A qualified valuation helps determine how much value you’re transferring and supports the amount reported on an estate or gift tax return. It can also make it easier to plan ownership transfers fairly among beneficiaries.
5. Plan for Estate Liquidity
A $20 million estate could still have a cash problem if most of that value is tied up in a business or real estate.
Taxes, debts, professional fees, and other expenses may still need to be paid after death. Without enough liquidity, beneficiaries could be left selling assets to raise the cash.
Cash reserves, life insurance, and other funding arrangements can be considered ahead of time to provide enough liquidity to cover those obligations without forcing an unplanned sale of valuable assets.
6. Coordinate Planning for International Assets
If your estate includes assets outside the U.S., determine how each asset will be taxed, reported, and transferred in every relevant jurisdiction before deciding how to structure it.
Foreign real estate, financial accounts, investments, and business interests may be subject to different rules in the U.S. and the country where they’re located. Citizenship and residency can also affect the treatment of transfers, particularly when a spouse or beneficiary isn’t a U.S. citizen.
Coordinating these requirements early can help you structure ownership and transfers with the tax and reporting consequences in both countries in mind.
Common Gaps That Weaken High Net Worth Estate Plans
Even a well-designed estate plan can have gaps that affect how smoothly your assets are transferred or whether the plan works as intended.
Some common ones to look for include:
- Outdated asset information: A plan written years ago may no longer reflect what you own today, particularly after a business grows, new entities are created, or significant property or investments are acquired.
- Mismatched beneficiaries and ownership: Retirement accounts, insurance policies, and jointly owned assets may transfer based on their beneficiary designations or ownership structure. If those details aren’t aligned with your estate plan, assets could go to someone you no longer intend to receive them or be distributed differently than you planned.
- Outdated liquidity planning: Liquidity needs can change as asset values, debt, insurance coverage, and projected tax obligations change. If those assumptions aren’t reassessed, the estate may not have enough cash available when taxes and other expenses come due.
- Outdated business succession: Changes in ownership, business value, or who will eventually run the company can leave an older succession plan out of step with the estate plan.
- Foreign assets left out: Property, businesses, or investments outside the U.S. may be subject to different tax, reporting, and transfer rules. Leaving them out of the broader estate plan can create problems when the assets eventually change hands.
- Advisors working separately: Estate decisions often touch tax, legal, investment, and business matters at the same time. If your attorney, CPA, financial advisor, and other specialists make decisions separately, they may miss important tax or transfer consequences.
How CDH Supports High Net Worth Individuals
Estate planning decisions can touch several areas of your financial life at once. At CDH, we look at the tax implications alongside your assets, business interests, and long-term plans.
Our team can help you:
- Evaluate estate and gift tax decisions: Consider gifting strategies, exemption use, trust-related tax implications, and charitable giving in the context of your broader estate.
- Connect business value with succession planning: Understand what your business is worth and how ownership, succession, or exit decisions may affect your estate and liquidity needs.
- Plan across state and international tax rules: Identify state and local tax considerations as well as foreign reporting, residency, treaty, and cross-border tax issues that may affect your plan.
- Coordinate with your other advisors: Work alongside your estate planning attorney, financial advisor, and other professionals so tax, legal, investment, and business decisions support the same long-term plan.
CDH has been serving businesses and their owners since 1996, and as an independent, partner-owned firm, we focus on long-term relationships rather than one-time engagements. For clients with international interests, we also have access to local expertise in 100+ countries through the Moore Global network.
Speak with a CDH advisor to discuss the tax decisions that could shape your estate plan.
Frequently Asked Questions (FAQs)
Here are a few common questions that come up when planning a larger or more complex estate:
Do High Net Worth Individuals Need Both a CPA and an Estate Planning Attorney?
In most cases, yes. An estate planning attorney handles the legal documents and trust structures, while a CPA focuses on the tax implications of gifting, asset transfers, estate tax, and other financial decisions.
For a complex estate, the two should work together so the legal structure and tax strategy support the same plan.
What Happens to a Large Estate Without an Estate Plan?
Without an estate plan, you may have little control over how assets subject to probate are distributed, since state law may determine who receives them.
You may also leave your beneficiaries to deal with tax, liquidity, business succession, and valuation issues after your death, when many planning options are no longer available.
How Often Should a High Net Worth Estate Plan Be Reviewed?
There isn’t a required schedule, but you should review the plan regularly and after major changes in your finances or personal circumstances.
A business sale, substantial increase in wealth, marriage or divorce, inheritance, relocation, changes in beneficiaries, or a change in tax law can all be reasons to revisit the plan.
How Much Does High Net Worth Estate Planning Cost?
There isn’t a standard cost for high net worth estate planning. The fee depends on what your estate requires, which may include tax planning, trusts, business valuation, succession planning, or cross-border tax support.
At CDH, we tailor the engagement to your needs and provide pricing in advance so you know what to expect before the work begins.
Who Should Serve as Trustee for a High Net Worth Estate?
The trustee should be someone you trust to manage the assets and make decisions in the beneficiaries’ best interests. With a large or complex trust, that role can involve investments, distributions, tax filings, and ongoing administration.
You may choose a family member, a trusted close friend, or a professional trustee. The important question is whether that person has the time, judgment, and experience to take on the role.
Conclusion
High net worth estate planning comes down to making deliberate decisions about how your wealth will eventually change hands. That includes deciding when to transfer assets, accounting for the taxes that may follow, planning for business interests and liquidity, and keeping the plan current as your circumstances change.
The earlier you identify gaps, the more options you generally have to address them before a transfer or other major event.
At CDH, we help you look at your estate plan as a whole, bringing tax, business valuation, succession, liquidity, and cross-border considerations into the same conversation. As your assets, business, and plans change, we can work alongside your attorney and other advisors to evaluate how those changes affect the decisions you’ve already made and what may need revisiting.
Contact us to discuss your estate and tax planning needs.
