Gift early and often.
- Complete annual exclusion gifting early in the year
- Take advantage of increases in estate tax exemption each year
- Utilize lower gift taxes vs estate tax rates
Use compounding to your advantage. It’s the most powerful investment return.
- Use techniques that transfer assets to the lowest generation possible as soon as practical
- Pay attention to the sizing of the transfer
Be Ready When Life Happens.
- Be flexible in planning and trust design because nothing works as planned
- Consider the impact of divorce in all aspects of planning
- Create trusts that are flexible
- Set up advanced life directives for anyone over 21
Anticipate changes in tax rules.
- Take advantage of favorable rules as soon as practical
- Plan for IRS audit risks as well
All techniques have varying levels of risk components.
- Mortality – factor for GRAT
- Investment performance – factor for all freeze techniques
- Audit risks – clearly communicate which techniques are governed by IRC Statute
Guard against creditors and predators.
- Use trusts for asset protection
- Recommend prenuptials
- Select trustees and other management very carefully
Preserve Intent.
- Document intent
- Incorporate into legal documents to the extent possible, such as any charitable entity
Integrate Planning
- Don’t ignore cash flow impact
- Balance techniques to take advantage of low income tax rates
Carefully consider.
- Plan to keep future generations motivated
- Carefully consider use of trust to limit access to large amounts
- Thoughtfully decide the appropriate age at which the next generation should serve either as trustee or co trustee and ages of distribution
Be Mindful of Morals and Ethics.
- Have conversations about values that have guided the family
- Incorporate those values and beliefs into the integrated approach to wealth management and into charitable entities
- Share the plan with the entire family
Run the numbers.
- Document impact today, at death, and for surviving generation for each planning technique
- Do no harm, i.e., don’t benefit one generation at the high expense of another
Implement – The most important process of estate planning.
- Don’t do anything you don’t understand and read everything before you sign
- Inform the family
- Solicit input from other trusted advisors
- Understand that wealth transfer is a marathon, not a sprint
- Prioritize techniques in order of potential impact and risks
Use the best, forget the rest.
- Choose valuation, investment, legal and accounting professionals carefully
- Choose advisors that work well with peers
- Insist on understanding downside risks of each technique
Communicate.
- Ensure that advisors understand your objectives before they start
- Be comfortable asking questions – there is no such thing as a stupid question, but no questions can lead to poor design