At Kenneth E. Devore & Associates, APC, we represent high net worth individuals in developing strategic wealth transfer plans. We often work with owners during the sale of a closely held business to maximize planning opportunities. We collaborate with corporate counsel to develop succession plans and options for passing down the family business to future generations in the most tax-efficient manner.
Sophisticated estate planning often involves establishing complex structures designed to save taxes, and protect against divorce, family disagreements, and creditors. Specialized trusts, such as intentionally defective grantor trusts (IDGTs), irrevocable life insurance trusts (ILITs), spousal access trusts (SLATs), grantor retained annuity trusts (GRATs), charitable remainder trusts (CRTs), and charitable lead trusts (CLTs) may be established. Donor Advised Funds (DAFs) and/or private foundations may also be utilized for clients with charitable intent.
Setting up such structures in collaboration with a client’s advisors, including the accountant, financial advisor and other professionals is one component of a successful estate plan; however, a brilliant planning structure will likely fail if it does not fit the family culture.
Thus, a second component to successful strategic wealth transfer is identifying the family culture and matching the planning structures to fit within that culture. For example, some families are comprised of individualists who maintain little contact, while other families are much more connected emotionally, but may keep their financial affairs very separate. Some families are extremely connected – they may operate a family business, own real estate together, or pool assets in a family management entity.
Planning for the individualist family requires careful consideration of each individual and his or her capacity to manage wealth. A complex family partnership would likely fail in this situation. Liquidation of assets at the client’s death by a professional trustee (depending on family dynamics) may be the appropriate plan. Division into separate trust shares may be advisable to give each family member the benefits of trusts (i.e., tax advantages, divorce protection, asset protection). Competent family members may control their own trust, while less competent family members may need the help of a professional trustee. Less financially literate family members can be educated during a client’s lifetime to better prepare for inheritance.
A more integrated family that either works together in a family business or voluntarily pools assets to invest as a group may thrive with a family limited partnership or LLC. The goal of such a family may be to grow family wealth rather than just preserve it. Regular family gatherings, developing family governance structures, and regular attention to improving these structures can help such a family thrive.
No two wealth transfer plans are the same. We make sure to provide each client with thoughtful, innovative tools to best accomplish their financial and personal goals.