What Qualifies as High Net Worth?
The Currency considers a high-net-worth individual to be one that has $2.2 million in net worth, or over $1 million in liquid assets. Liquid assets include assets that can be easily and quickly converted into cash within a short amount of time. Liquid assets include stocks and bonds, bank accounts, money market funds, and other marketable securities, excluding a primary residence or, in general, any real estate holdings. “Very high-net-worth” individuals are those with at least $5 million in liquid assets, while an “ultra-high-net-worth” individual is one with at least $30 million in liquid assets.
The United States has more high-net-worth individuals than any other country in the world. About two million U.S. households met the definition of very high net worth in 2020, while 11.6 million U.S. households met the definition of high net worth. Extra steps must be taken during the estate planning process to ensure the assets of high-net-worth individuals are properly protected for future generations. When you choose a knowledgeable high-net-worth estate planning and Administration attorney from NC Planning, you can rest easy, knowing we will protect your assets and help you plan for your future and carry on your legacy.
Case Illustration for HNW Planning
George has worked as an architect for the past thirty years, and, as a result of being extremely thrifty with his money, along with some good investments, now has more than $1.5 million in liquid assets, along with significant real estate holdings both in North Carolina and in Pennsylvania. While George doesn’t consider himself “rich,” he does want to ensure what he has is preserved for future generations. George won’t be hit by the federal estate tax, which requires assets of more than $12.92 million, but he must still consider the implications of how state estate taxes will affect his Pennsylvania properties (there is no estate tax or inheritance tax in North Carolina, however, Pennsylvania has an inheritance tax rate of 4.5 percent for transfers to direct descendants, 12 percent for transfers to siblings, and 15 percent for transfers to other heirs).
George is looking for estate planning strategies that will minimize his current tax liability as well as any tax liability his heirs could have after his death. George currently makes many charitable donations and wants to factor this into his estate plan. After speaking to a knowledgeable high-net-worth estate planning and administration professional from NC Planning, George has a much better understanding of the different ways he can protect his legacy for future generations while continuing his charitable donations even after he is gone. The NC Planning team will work with George’s financial advisors to provide a comprehensive, personalized approach to his estate planning needs.
Understanding Your Goals Regarding High-Net-Worth Estate Planning
When you choose a strong high-net-worth estate planning and administration attorney from NC Planning, we strive to understand your goals, then we will share our strategies for reaching those goals through proper estate planning. These strategies may include:
- Wealth Preservation can be accomplished in many different ways and is usually a key component of high-net-worth estate planning. At NC Planning, we will comprehensively assess your specific situation, then make such recommendations as business succession planning, the use of trusts, consolidation of assets, charitable giving, splitting family income, or spending restrictions for family members after you are gone.
- Security for Generations—Perhaps you have some concerns regarding one or more of your adult children or their spouses regarding how an inheritance would be used. If this is the case, you can put certain restrictions on their inheritance. You could stipulate that the inheritance is used only for certain things, or you could set up a trust so that a trustee is in charge of distributions. You can also avoid having the creditors of an adult child’s spouse use the inheritance.
- Charitable Giving can definitely play a part in high-net-worth estate planning. A Charitable Remainder Trust (CRT) can potentially reduce overall tax liability by offering designated family members a stream of income for a specified time period. When this time period ends, the remaining assets will go to a chosen charity.
- Selecting a Trustee is a big responsibility for high-net-worth individuals. The administration of a trust is a time and labor-intensive job, that requires a trustworthy individual who has at least some knowledge of financial issues. While many people choose a friend or family member, it could be beneficial to choose a professional trustee. Professional trustees have the experience necessary to effectively manage your trust with no personal ties to beneficiaries which could sway their decisions.
- Business Succession planning is crucial for anyone with a business but comes with more complexities for high-net-worth individuals. Most people who go through the hard work, risk, and sacrifice of establishing a business hope that business will continue long after they are gone. Unfortunately, all too often, there is little thought put into determining who will take over once you’re gone—and how that transition will be accomplished. As a business owner, you may be too caught up in the business challenges of the present to consider the future, or you may assume business succession will work itself out naturally. Or perhaps you have thought of a business succession plan but have found it overwhelming. Regardless of your situation, a highly skilled high-net-worth estate planning and administration attorney from NC Planning can help you find the best solution to your business succession needs.
Foundational Tools for High-Net-Worth Estate Planning & Administration
Some of the foundational tools associated with high-net-worth estate planning and administration include:
- Financial Powers of Attorney are used when you want to designate a person to handle your financial issues in the event you become incapacitated and unable to do so, or when you need someone to take over for you when you will be out of state or out of the country.
- Healthcare Powers of Attorney designate a specific person who will make healthcare decisions on your behalf should you become incapacitated. It goes without saying that you want a person you trust to make healthcare decisions you would be on board with.
- HIPAA Authorizations allow you to specify which person or persons are allowed to receive information regarding your health information.
- Living Wills are sometimes called advance directives. A living will does much the same thing as a healthcare power of attorney, usually specifying the specific medical treatments you would or would not want.
- Life Insurance proceeds may go to a single beneficiary, or more than one beneficiary. In most cases, life insurance does not have to go through the probate process.
- Guardianship Documents are crucial if you have minor children. If you do not have guardianship documents or have not named a guardian in your will, your children’s future will be left to chance as the court will choose a guardian. The choice made by the court might not be one you would approve of. Guardianship documents may also detail the financial aspect of raising your child or children.
Asset Protection Plans for High-Net-Worth Estate Planning & Administration
Asset protection is the goal for high-net-worth individuals, and, depending on your specific circumstances, this goal can be accomplished in a number of ways, including gifting assets to loved ones. A strong high-net-worth estate planning and administration attorney from NC Planning can help you protect your hard-earned assets in the best way possible. Other types of asset protection for high-net-worth individuals include:
- Charitable Planning can encompass many different aspects, including naming specific charities in your estate plan, setting up Charitable Lead Trusts, Charitable Remainder Trusts, or Charitable Gift Annuities, making qualified charitable distributions from IRA accounts, using donor-advised funds, or donating appreciated assets.
- 2026 BBB Bill—This bill has a provision in it that is set to expire in 2026 that places limitations on excess business losses for high-income owners of pass-through businesses. Pass-through business owners may only deduct up to $500,000 in losses from their business against non-business income in any given year, however, the provision could potentially be made permanent.
- CRT or Charitable Remainder Trusts can have significant benefits, although there are also certain drawbacks. When you set up a CRT, you can receive an income for life, or for a specified number of years. After your death, you can set up the CRT so that your beneficiaries also receive a specific income for a specified number of years. At the end of that time, the remainder of the CRT goes to a designated charity. The trust is irrevocable, meaning it cannot be altered or dissolved, and if the trust property decreases in value, you or your beneficiaries could receive significantly less income than anticipated.
Trusts
Trusts are a primary aspect of estate planning for anyone, but particularly for high-net-worth individuals. Some of those trusts include:
- Revocable Trusts are not subject to probate, allowing you privacy in how your assets are distributed after your death. You can make changes to the trust while you are alive, manage your own funds, add or remove beneficiaries, and even dissolve the trust.
- ILITs (Irrevocable Life Insurance Trust) allow you to establish a trust, making that trust the beneficiary of your life insurance policy and shielding your beneficiaries from any legal action against you. Since an ILIT is not “owned” by beneficiaries, the court cannot label it as an asset. An ILIT can also prevent a life insurance payout from going directly to a minor until he or she is an adult.
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- IDGTs (Intentionally Defective Grantor Trust) are used to freeze certain assets for purposes of estate taxes, but not for income taxes. An IDGT possesses a loophole that allows you to receive income from certain trust assets. While the grantor of an IDGT pays income tax on generated income, the estate incurs no estate taxes after your death.
- SLATs (Spousal Lifetime Access Trust) are irrevocable trusts created by one spouse for the benefit of the other, and, eventually, the couple’s children. Assets are transferred into the trust, removing them from the taxable estate, allowing the beneficiary spouse to access income from the trust—and, in certain situations, the principal as well.
Business Succession Planning
Business succession planning should be started early to ensure success and ensure you do not wait so long that your exit strategy is no longer viable. The benefit of having a business succession plan is that it allows you to work with those who will eventually take over your company. A business succession plan allows you to pass on your knowledge and instill your vision for the long-term success of the business you have spent years—or a lifetime—building.
How NC Planning Will Help You Plan for the Road Ahead
When you have a high-net-worth estate planning and administration attorney from NC Planning by your side, the planning process will go smoothly, and the outcome will meet your stated goals. We can take an active role in helping you create a high-net-worth estate plan, then an active or advisory role in the administration of that plan when the time comes. We consistently deliver stellar Client Care—it’s not something we just talk about; we live and breathe the culture. NC Planning has law offices in Cary, Raleigh, Greensboro, and Wilmington, NC for your convenience. Contact NC Planning today to speak to a knowledgeable high-net-worth estate planning and administration attorney.