Creating an estate plan for high net worth individuals can be challenging, as higher tax brackets and various options can lead to difficult decisions. High net worth estates are often subject to steep taxes, which can mean smaller gifts for beneficiaries and a reduced legacy. However, finding the right solution among many options is not always straightforward. Not only must one decide between wills and trusts, but there are often many kinds of wills and trusts that all offer unique benefits. However, many high net worth individuals opt for an irrevocable trust, due to its high privacy, ability to avoid probate and potential tax savings.
These factors may also influence the estate plans of snowbirds living between Minnesota and Florida. A skilled elder and estate planning lawyer from Roulet Law Firm, P.A. can help clarify the benefits and drawbacks of irrevocable trusts to leave a lasting legacy. For more information, consider scheduling a consultation by calling (941) 909-4644 for the Florida office and (763) 420-5087 for the Minnesota office. Or you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
High Net Worth Estates
In America, a high net worth individual is generally considered to be anyone with more than one million USD in liquid financial assets. While this may seem an extreme title, with roughly eight million high net worth individuals recorded in 2023. Generally, these individuals exceed the gift and estate tax exemptions, subjecting them to higher tax rates.
For those who wish to leave a lasting legacy and give the most possible to their beneficiaries, one may need to consider alternatives to avoid these taxes, including donations, gifts, and trusts. Understanding the will and desires of the grantor for their estate can help guide individuals into choosing the right method to ensure their wishes are carried out.
Understanding Estate Taxes
While the Internal Revenue Service levies a federal estate tax that may not be avoided with trusts and other legal entities, each state also has specific state estate tax laws. The beneficial tax climate of Florida is one of the reasons many people choose to retire there. Understanding the specific tax laws of each state can be key to determining if irrevocable trusts are the right choice.
Minnesota
The State of Minnesota levies an estate tax on estates valued at over $3 million, and charges between 13% and 16%, according to the Minnesota Department of Revenue. Higher value estates will likely be subject to the high end of that scale, and lower value estates will not be taxed as heavily. Understanding one’s tax bracket can help to clarify the benefits and drawbacks of Minnesota taxes.
Florida
One of the benefits of retiring in Florida is that the state does not levy any estate tax as of the beginning of 2005. This does not exempt one from paying federal estate taxes to the government, but it may protect a significant portion of one’s assets from taxation.
For more information on the nuances of tax law in Minnesota and Florida, consider speaking with a skilled elder and estate planning lawyer from Roulet Law Firm, P.A.
Estate Planning Strategies for High Net Worth Estates
When it comes to creating an estate plan for high net worth individuals, there are many aspects of the process to consider. As high net worth estates are taxed much more heavily, it may take some strategy to avoid the brunt of those taxes and ensure that one’s wishes are carried out after death. Some people may even choose to have multiple trusts to protect their assets.
What most people do in this case, is to find a clear vision of what they want to do with their finances after their death. Having a clear plan, naming proper beneficiaries, and understanding the impact and legacy you want to leave in the world can help determine which estate plan is best for which individual. After this, one must consider the possible methods of achieving this, often with the help of legal counsel.
What is an Irrevocable Trust?
One of these many paths that many high net worth individuals choose is the irrevocable trust. An irrevocable trust is a legal entity that protects one’s assets and distributes them upon the grantor’s death. It is similar to a will, however, due to the nature of a trust, it does not go through probate court and is generally more private than a will.
While some trusts can be modified and adjusted after their creation, an irrevocable trust is different in this regard. The nature of the trust prevents it from being altered, even by the grantor, except for certain rare circumstances. This adds a level of protection for one’s estate and can help to ensure that one’s wishes are adhered to.
Benefits of Irrevocable Trusts
Using an irrevocable trust in an estate plan has several key benefits. While you must give up a certain amount of control over the assets once they are deposited in the trust, many other factors make this a desirable option.
Tax Benefits
The primary draw of using an irrevocable trust for high net worth estates is the tax benefit. Trusts in general are considered their own legal entities controlled by a trustee, which may exempt them from estate taxes altogether, depending on the size and type of the estate. For higher value estates, this can increase the amount available to bequeath by a significant amount, increasing the impact of one’s legacy.
Examples of irrevocable trusts that can help to minimize or even avoid estate taxes include spousal lifetime access trusts, charitable trusts and irrevocable life insurance trusts.
Privacy
In addition to tax benefits, irrevocable trusts also increase the privacy of the estate. Wills go through the probate court, and all probate court records are public. While this may not be a problem for low net worth estates, utilizing a trust can protect high net worth estates from any unwanted public eyes.
Probate Avoidance
Irrevocable trusts also avoid the probate process, which both protects from taxes and unwanted scrutiny as previously stated, but also speeds up the estate distribution. Avoiding probate means that the courts do not need to examine and confirm the details of the estate plan, which can help to ensure that one’s wishes are carried out after death.
Contact a Florida and Minnesota Estate Planning Attorney
For those high net worth individuals who want to create a solid estate plan while moving between Minnesota and Florida, an irrevocable trust may be the right choice. This method can help protect assets from taxes without relying on state courts to affirm and play a role in distributing the inheritance. Having a private, efficient estate plan is a popular choice for large and complex estates. However, creating an irrevocable trust for large estates may have unforeseen complications. For more detailed advice, consider speaking with an experienced Florida and Minnesota elder and estate law attorney from Roulet Law Firm, P.A. Schedule a consultation by calling (941) 909-4644 for the Florida office and (763) 420-5087 for the Minnesota office. Or you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
Or, if you are not yet ready to schedule a consultation and would like to learn more, here are some additional resources we have available:
Join us in my masterclass where I reveal how to avoid probate, wills vs. trusts, how to minimize taxes, how to protect the money you leave for your kids in the event they get divorced and much more. Click here to sign up.
To learn more about the legal requirements for establishing Florida residency and ensuring you are no longer taxed "up north", download your copy of my book, "The Florida Snowbird Guide: A Fast & Friendly Legal Guide for Florida Snowbirds & Relocation". Click here to get your copy.
