Estate planning for millionaires is essential, as wealthy families have more assets to protect and pass on to the next generation. Larger estates are often complex, with multiple homes, business interests, investment accounts, vehicles, jewelry, and other valuable assets.
Effective estate planning organizes your financial affairs, ensuring your heirs do not face a complicated mess after your passing. “A well-thought-out plan can be a gift in and of itself to your heirs,” says Matthew Fleming, senior wealth advisor at Vanguard. It also ensures that your beneficiaries receive what you have set aside for them and minimizes tax liability for everyone involved.
Estate Planning for Millionaires: First Steps If you haven't created an estate plan yet, you’re not alone. Only 26% of Americans have one, according to a survey by FreeWill, a DIY estate planning firm. However, among those with over $500,000 in assets, more than 50% have a plan, especially men.
The financial services industry categorizes wealthy clients based on the value of liquid assets owned. Liquid assets exclude your home, collectibles, and other valuables that are not easily converted to cash. These tiers range from ordinary investors to ultra-high-net-worth individuals (UHNWI), as shown below. Definitions vary; some firms define UHNWIs as having at least $25 million, while others set the threshold at $30 or $50 million.
Classification Liquid Assets Held Ordinary Investor Under $100,000 Mass Affluent $100,000 to $1 million High-Net-Worth Individual (HNWI) At least $1 million Very-High-Net-Worth Individual (VHNWI) At least $5 million Ultra-High-Net-Worth Individual (UHNWI) At least $30 million
These classifications help determine the level of estate planning assistance you might need. The more significant your liquid assets, the more likely you will require a bespoke plan created with a wealth management team.
People and Paperwork
Estate planning does not have to be daunting, even for large estates. Think of estate planning as a process about people and paperwork, advises Vimala Snow, managing director and head of wealth strategy at Cresset Capital. She emphasizes the importance of appointing trusted individuals to oversee your affairs and ensuring all legal documents expressing your wishes are properly executed.
The People on Your Team: Hire an estate planning attorney to set up trusts and help you choose a trustee. “Having somebody who’s almost like a quarterback for everything can be really helpful to guide whom you should meet, when you should meet with them, and how complex it should be,” says Ryan Viktorin, vice president and financial consultant at Fidelity. Add a tax accountant and financial advisor to round out your team.
The trustee can be the asset owner, another person, or a financial institution. If you choose another individual, ensure they are trustworthy and can coordinate all the moving parts. Snow adds, “They do not have to be financial or legal experts, but they must work with accountants, lawyers, and financial advisors to serve the beneficiaries' best interests.”
The Paperwork You Need: Snow states that everyone needs a few key documents: a will, revocable trust, powers of attorney for finances and health care, and a living will. “The goal of all these documents is to provide the roadmap for trustees and beneficiaries so you can sleep well at night, knowing the right people will benefit and you will have the right decision-makers in charge.”
Federal and State Estate Taxes
Most estate plans start with a revocable trust to park assets. This is incredibly common, Viktorin notes, because “you still have full access. You can revoke it at any time, and it is still your money. The trust dictates what happens to the estate upon your passing.”
For those with more assets to distribute and shield from taxes, irrevocable trusts are an option. Unlike revocable trusts, these require you to give up ownership and control of the assets placed inside them—with some exceptions. In return, the assets in irrevocable trusts are not taxable to the owner.
The window for lower taxes may be closing. Advisors expect a surge in irrevocable trusts set up over the next year to take advantage of the current lifetime estate tax exemption of $13.61 million ($27.22 million for a married couple), which will be halved on January 1, 2026, when the Tax Cuts and Jobs Act expires.
Some states also charge estate taxes, each with different rules, Viktorin says. Currently, 33 states do not levy these so-called “death” taxes. If you live in a state without these taxes but move to one that does, revisit your estate plan, Viktorin advises.
In addition to the irrevocable trust, Viktorin details other commonly used trusts. An irrevocable life insurance trust (ILIT) houses your life insurance with instructions on how to distribute the payout upon your death. A special needs trust provides for disabled loved ones without jeopardizing their government benefits. A charitable gift trust can help reduce taxes and satisfy philanthropic goals; ultra-high-net-worth families are most likely to employ charitable trusts.
Keep on Gifting
Fleming suggests another way to shield assets from taxes is to use annual gift exclusions—you can give away $18,000 a year (or $36,000 for a couple) to as many people as you wish. “If you tally that up, that’s a significant amount of money you could give away annually,” he says. Additionally, paying tuition or medical bills directly to the school or healthcare provider exempts these gifts from taxes. You can also put gifts in trust; these will not count towards the lifetime estate tax exemption.
For larger amounts than the gift tax exemption, consider loaning money to family or friends, Fleming advises. However, you must charge interest. The minimum interest depends on the IRS’s applicable federal rates, which can be lower than market rates. These rates change monthly and have different terms: short-term (less than three years), mid-term (three to nine years), and long-term (more than nine years).
Handling Assets Abroad
If you have assets abroad and are a U.S. citizen, you might have to pay taxes to the IRS. “Just because an asset might be overseas doesn’t mean that the U.S. doesn’t want to know,” Snow explains. Other countries have different tax laws, so ensure you get local counsel.
Family Conflicts and Passwords
Snow advises communicating with your beneficiaries about what they should expect from your estate without sharing dollar figures. “Having people on board ahead of time can sometimes negate the negative family reaction,” she says. This conversation is crucial for succession issues in a family business.
Finally, ensure your trustees and beneficiaries have access to your accounts, Snow adds. Provide them with passwords, tokens, digital keys, and account locations.
With all the considerations that come with estate planning, it is easy to feel overwhelmed. Viktorin aims to simplify the process for clients. “My goal is always to help them create a plan that is as simple and streamlined as possible, but as sophisticated as necessary, given their situation.”
