Have you recently come into a large sum of money? Maybe you've inherited a significant amount, won the lottery, or sold a business. Whatever the source, a financial windfall can be life-changing. But it also brings new challenges, especially when it comes to estate planning.
As an estate planning attorney with nearly 30 years of experience, I've helped countless clients navigate these exciting but complex situations. Today, I'm sharing key insights to help you understand how a financial windfall impacts your estate planning.
1. It's Time to Reassess Your Estate Plan
When your financial situation changes dramatically, your existing estate plan might not cut it anymore. You need to take a fresh look at your goals and how you want to distribute your wealth. This is especially true if your net worth has jumped into the $500,000 to $25 million range.
For example, let's say you previously planned to leave everything to your spouse. Now, with more assets, you might want to set up trusts for your children or grandchildren too. Or maybe you want to leave money to a favorite charity. Your new financial situation opens up possibilities you might not have considered before.
2. Tax Implications Can Get Tricky
More money often means more tax headaches. You might now face estate taxes you didn't have to worry about before. Understanding these new tax challenges is crucial for smart estate planning.
For instance, as of 2024, the federal estate tax exemption is $13.61 million per individual. However, it is set to sunset to only $5 million in January of 2026. Also, if you live in a state with a separate estate tax, like Minnesota (currently only a $3 million dollar exempton), you may now need to contend with that as well. If your windfall pushes your estate value over this threshold, you'll need strategies to minimize the tax bite. This might include gifting strategies or setting up certain types of trusts.
3. Your Will and Trusts Might Need an Overhaul
Your will and any existing trusts should reflect your new financial reality. This might mean updating beneficiaries, changing how assets are distributed, or even creating new trusts.
For example, you might want to set up a spendthrift trust to protect assets you're leaving to a family member who's not great with money. Or you could create a charitable remainder trust to support a cause you care about while also providing income for yourself or your heirs.
4. Charitable Giving: A New Opportunity
A financial windfall can open doors to meaningful philanthropy. Not only can this be personally rewarding, but it can also provide tax benefits.
You might consider setting up a charitable trust or a private foundation. These tools allow you to support causes you care about while potentially reducing your tax burden. It's a win-win that lets you do good while also being smart about your finances.
5. Smart Investment and Wealth Management is Crucial
With more wealth comes more responsibility to manage it wisely. This is where working with financial advisors becomes crucial. They can help you invest your windfall in a way that supports your long-term goals and keeps your estate stable and growing.
Remember, it's not just about making your money grow. It's about aligning your investments with your overall estate plan. For instance, if you plan to leave a significant inheritance to your children, you'll want an investment strategy that balances growth with preservation of capital.
6. Protecting Your Assets is More Important Than Ever
When you have more assets, you have more to lose. That's why asset protection becomes even more critical after a financial windfall.
You might want to explore strategies like domestic asset protection trusts or limited liability companies to shield your wealth from potential lawsuits or creditors. These tools can help ensure that the wealth you've gained stays intact for you and your heirs.
7. Regular Reviews are a Must
After a financial windfall, your estate plan isn't a "set it and forget it" deal. You need to review and update it regularly. Your financial situation might continue to change, or your goals might shift over time.
I recommend reviewing your estate plan at least every three to five years, or whenever you experience a significant life change. This helps ensure your plan always reflects your current situation and wishes.
Don't Navigate This Alone
A financial windfall is exciting, but it also brings complexity to your estate planning. You don't have to figure this out on your own. As an experienced estate planning attorney, I've helped many clients in situations just like yours.
At Roulet Law Firm, we specialize in sophisticated, custom-tailored planning for successful families. We can help you navigate these changes, minimize taxes, protect your assets, and secure your financial legacy.
If you've experienced a financial windfall, don't wait to update your estate plan. Even if you think you don't need it, or already have a plan, we can show you how proper planning can save your family time, money, and stress in the long run.
Contact us today at our Florida office at (941) 909-4644or our Minnetonka, Minnesota office at (763) 420-5087 to schedule a consultation. Or you can fill out the contact form on this page and a member of our team will contact you to schedule. Let's work together to ensure your newfound wealth is protected and managed in a way that aligns with your goals and values. Your financial windfall is an opportunity – let's make the most of it.
Or, if you are not yet ready to schedule a consultation and would like additional information, we have some resources for you.
If you would like to learn more about wills and trusts and how you can make it as easy and inexpensive as possible for your family, Click Here to sign up for my online masterclass where I reveal insider strategies for your will, trust, financial power of attorney and health care documents, as well as how to minimize or even avoid estate taxes, and how to protect the money you leave for your children and grandchildren in the event they get divorced, get sued or something else happens to them.
If you would like to learn more about how to protect your home and savings from long-term care and nursing home costs. I have two resources for you:
