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Inheritance Planning for High Net-Worth Individuals

When you’re looking to preserve your wealth for generations to come, inheritance planning is a crucial step in the process. Estate and inheritance planning can be a complicated undertaking for anyone, but it might be especially difficult for those who have a high net worth. Here are a few tips to take under consideration when thinking about how to plan for inheritances as a high net-worth individual.

Have an open discussion about end-of-life wishes

It’s important to understand that a significant inheritance can greatly affect the lives of your beneficiaries, and with it comes a lot of responsibility. It’s not uncommon for investors to be nervous about beneficiaries being irresponsible with their inheritance money.

The first step is the easiest, but it’s not without difficulty. While thinking about death isn’t the most comfortable topic for everyone, having an open and honest discussion about expectations and wishes will help facilitate clarity and understanding between you and your beneficiaries. Figuring out where you align (or don’t) can help guide the conversation. 

You’ll also want to consider the current financial status of your beneficiaries. There could be significant tax implications for those who earn more in yearly income and are therefore in a higher tax bracket. 

Discuss whether setting up a trust would be a good option

Inheritance planning as a high net-worth individual goes beyond dictating instructions in a will. You may want to set up a revocable trust for your beneficiaries, the assets of which you control during your lifetime, but that go to your beneficiaries upon your death. If you want to skip a generation and further preserve your legacy, there’s a trust for that. If you have extenuating circumstances, such as naming a family member with a disability as a beneficiary, you may need to look into setting up a special needs trust instead. 

Consider how taxes will affect your beneficiaries

The current gift and estate tax exemption for 2022 is $12.06 million, and the individual gift-tax is $16,000 per year. Beneficiaries generally don’t pay income taxes on inheritances, but they will have to claim distributions received as part of their inheritance depending on how their inheritance was set up. If the inheritance is a real estate property, there are other laws that need to be considered (especially in California, where Prop-19 is in effect).

Inheritance planning for beneficiaries with Chatterton and Associates

Inheritance planning can be a complicated process and it is wise to discuss it with a legacy planning team: your financial advisor, tax professional, and estate planning lawyer. Whether you have questions about how to maximize estate planning efforts as a high net-worth individual or whether you want your beneficiaries to be present for important estate and wealth planning conversations, we’re happy to help. Contact us today to achieve peace of mind for this crucial step in legacy and estate planning.


The Team at Chatterton & Associates

Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Royal Alliance Associates, Inc nor its representatives provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

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