The Best Estate Planning Strategies for High Net Worth Investors

Estate planning is no small feat; in fact, for most individuals, it’s an ongoing process. Even with the guidance of a team of financial and tax advisors, estate planning experts, and specialists in life insurance, annuities, and other investment alternatives, you may be shocked to learn how much of your estate could be lost to taxes. Estate tax mitigation is a key element of estate planning, but in order to be effective in minimizing tax liability, it’s vital that you understand the criteria for imposing both estate and income taxes.


In 2017, the estate tax exemption was set at $5.49 million per individual and $10.98 million for married couples. Any assets over and above these sums will typically be subject to taxation, which can reach well over 50% or more if you include the impact of any possible state estate taxes. High net worth individuals with an estate valued above these thresholds must employ a number of strategies in order to maximize the transfer of wealth to heirs and charitable interests. The good news is that only two out of every 1,000 estates will be subject to federal estate taxes this year, which is largely attributable to the efforts of expert estate planning advisors who work with high net worth investors to minimize their estate tax liability.

So, how then can you develop a solid estate planning strategy as a high net worth investor? I routinely encourage our clients to consider the approaches described below. However, before taking any sort of action, be sure to discuss strategies with your financial advisor and estate planning team. This will ensure that you make the right move for your precise priorities and requirements.

Properly Titling Assets as a High Net Worth Estate Planning Strategy

A properly structured estate should provide ample access to assets needed while you are alive without compromising your overall estate and legacy plans. While certain assets may be directly owned by you or your spouse, it is wise to make certain that other assets are safely outside your estate for estate tax purposes. Some assets such as business interests and investment portfolios, and retirement accounts will require you to maintain direct control, while other assets such as life insurance may be outside of the estate in a properly structured trust.

Estate taxes can reduce the value of your estate by 50% or more, but these taxes apply only to assets owned directly by you. By ensuring that your assets are properly titled, you’ll be better equipped for the estate planning process.

Systematically and Strategically Reducing the Size of Your Estate

While it may seem counterintuitive, reducing the size of your estate could result in a larger transfer of wealth to your heirs as you may qualify for a lower tax bracket. An effective strategy will often include developing a plan that includes the creation of trusts, reallocation of assets to children, and qualified donations, all with the goal of helping you achieve the transfer of as much of your wealth as allowable.

Additionally, strategic gifting may also be beneficial as it entails distributing up to $15,000 per recipient each year—and it is free of taxation and does not reduce your estate/gift tax exemption. This can serve as an effective method for reducing the size of your estate in a tax-free manner.

Finally, it may be possible to pay for certain expenses for your heirs, such as college tuition, without being subject to gift taxes.This is another key area to explore with your accounting and financial team as well as your estate planning advisors.

Leveraging Qualified Charitable Donations as an Estate Planning Strategy

Another estate planning strategy is to take advantage of IRA Qualified Charitable Donations (QCDs). This serves to reduce the size of your estate while guaranteeing that your funds go to the intended recipient with minimal—if any—taxes due.

QCDs are available to IRA owners who are at least 70 ½ years old. The distribution must be paid directly to the non-profit organization. Married couples can each donate up to $100,000 per year from their own IRA, for a maximum gift of up to $200,000 per year, provided they maintain separate IRAs.

Using Trusts to Transfer Wealth from a High Net Worth Estate

Trusts often become a topic of discussion during the estate planning process, but trusts are not suitable for everyone—and not all trusts offer any substantial tax sheltering. This is because financial allocations to the beneficiary are typically considered taxable income unless properly structured.

That said, there are a number of types of trust, such as living trusts and irrevocable trusts, which serve different purposes and can be useful. Living trusts offer access to assets and offer maximum control while alive, while Irrevocable trusts seek to maximize tax exemptions on the wealth they’re passing along to heirs and charities. Therefore, it’s wise to work with your financial planner and estate planning consultants to determine which trust, if any,  may be beneficial for transferring wealth in your unique situation.

Life Insurance as an Estate Planning Tool for High Net Worth Individuals

Life insurance policies can serve as a very effective technique for conveying wealth to your loved ones—and even to charities. In fact, it’s often possible to secure a life insurance policy even later in life, imparting a greater tax-free sum to the beneficiary when you pass.


For instance, a sum of $80,000 could be used to secure a life insurance policy with a payout of up to $5 million (depending upon age and health, of course). Even when taxation on a life insurance policy is taken into account, the overall sum provided to the beneficiary would be greater than the amount of money that was paid into the policy. Life insurance should definitely be explored with an estate planning and life insurance expert if you are a high net worth individual looking for estate planning tools and investment alternatives.

Choosing the Right Estate Planning Advisor

If you are concerned about choosing a trusted advisor to work on your estate plan, you are not alone. A 2016 survey found that 53% of respondents reported challenges as they sought out the advice and guidance of an estate planning professional. To complicate matters further, many other consultants may have a role in your estate planning process as well, including your financial advisors, attorneys, CPAs, and life insurance advisors. Your individual goals are central to your estate plan; choosing an advisor that you feel can help you meet your unique objectives and overcome any challenges you may encounter is critical. In my many years of advising clients, I’ve found that while every client has their own story and their own goals, maximizing wealth transfer is typically their top priority.

source: howardkayeinsurance.com

For over 55 years, the professional team of advisors at Howard Kaye Insurance has been working with clients to achieve their estate planning goals using investment alternatives such as annuities and life insurance. Our experts have devised a number of effective strategies that serve to maximize the transfer of your wealth while simultaneously limiting and minimizing tax liability. This ensures that your loved ones and the charities that are close to your heart can enjoy the maximum benefit from your estate. Our advisors are ready to discuss your goals today, so contact our team by calling 1-800-DIE-RICH.

Can I Buy an Annuity Online or Without an Agent?

The internet has become the primary channel for consumers to obtain goods and services over the past twenty years, with the population as a whole becoming increasingly comfortable shopping online. You can now just as easily buy a car or your groceries via the internet as you can a bestselling book. 

The convenience of e-commerce is what draws many of us in, allowing for a seemingly endless selection of goods while saving valuable time and money. The internet has even developed into the channel of choice for purchasing financial products, including stocks, bonds, and life insurance. And there has been growing demand by investors to buy annuities online. 


And it’s no wonder that consumers look online for income planning products like annuities. Most savvy investors are well aware of their benefits, but many advisors fail to include them as a significant aspect of financial and retirement plans. According to one survey, 72 percent of advisors did not mention annuities with lifetime income as a strategy for retirement planning, showcasing not only why an investor may turn to their own online research for guidance, but also why individuals must find a trusted financial advisor that specializes in wealth concepts beyond stocks and bonds.

However, one thing that we’ve learned about the convenience of shopping online is that just because you can buy it online, doesn’t mean that you should. The more significant the purchase, the more difficult it is to guarantee you are making the right choice with your hard earned money. If you consider the complexity of a financial solution like an annuity, the question to consider is not, “Can I buy an annuity online without an agent?” but whether or not you should buy online as the most appropriate avenue for purchase. Let’s explore the many things a wise investor should first consider.


Can I Successfully Buy an Annuity Online or Without an Agent?

While you may see ads for online brokerage accounts, you’re less likely to find annuities advertised online. Annuities have not yet become commoditized in the way that brokerage accounts have, so there will be more work in finding a product that meets your needs without the guidance of a qualified insurance advisor. 

So, yes, you can buy annuities online without the help of an insurance agent, but you’ll have to spend a significant amount of time on research. And, there are only two channels for direct annuity sales online:

• Life insurance companies: Life insurances companies selling direct-to-consumer, which include the many household name insurers, will be among the top results in your search, but not all of them sell directly online. You may find a familiar name, click on a link and maneuver your way through a complicated online form only to land on a page that still requires you to speak to an agent in order to make your purchase. This is not only frustrating, it is misleading.
• Online marketplaces: Online marketplaces that sell investment products, including annuities, will also be among your search results. But how do you choose from these providers? Are they legitimate? Will you still have to speak to an agent? Do they have the breadth of products to meet your particular needs? There are many questions to be asked before investing with these sometimes unknown sources—and you may find that answers are hard to come by.

Trust is a crucial element when selecting a financial provider. What started out as a search to purchase an annuity online can easily turn into a mission to ensure that you can trust the provider. If you find yourself searching the Better Business Bureau website for complaints, perhaps you should trust your instincts and reconsider whether a licensed and well-respected financial advisor that you can build a relationship with is the most reliable means to secure your retirement, as opposed to trying to tackle the job on your own.


How to Buy the Right Annuity (and Why Having an Advisor Matters)

As with any financial or retirement product, you must take the time to fully understand what it is that you are buying. A survey by the Insured Retirement Institute found that 75% of investors claimed to be familiar with annuities, but only 46% knew that annuities can provide lifetime income.

 Annuities are designed to meet your long-term needs for retirement income and to help ensure that you don’t outlive your savings. There are two types of annuities: variable and fixed. Variable annuities place your investment in stocks and bonds, making them subject to market volatility. This means that your account could be worth more or less than your initial investment when you retire. Variable annuities require special securities licenses and put your principal at risk. They also have high fees. Fixed annuities, in contrast, can offer a guaranteed rate of return and are best when seeking a fixed or increasing income at retirement without the risk of market loss. Besides variable and fixed annuities, there are also subcategories of annuities that can add up to hundreds of options that may or may not be appropriate for you, your long-term goals, and your particular financial situation. 
 
As you can clearly see, annuities are among the more complex financial products that you can purchase; the do-it-yourself route is definitely not recommended. The stakes are just too high! While you certainly can purchase an annuity online, choosing to do so will limit you to very few choices. Whatever time or upfront cost you believe to be saving in the short-term may end up costing you your financial security in retirement. Having a trusted advisor that can match you with an annuity based on your specific financial picture is essential. It is the only reliable option to help you navigate through the myriad of annuity choices on the market. 

The annuity and insurance advisors at Howard Kaye Insurance work with more than 50 highly-rated and trusted insurance carriers. Helping you meet your retirement goal with individualized attention is our primary objective. Call us at 800-DIE-RICH or reach out online. We can work with you to create a plan that ensures you don’t outlive your retirement savings.

source: howardkayeinsurance.com

The Asset Protection Against Judgments and Creditors You Gain from Life Insurance and Annuities

Creditors and judgments are a fact of life, especially if you’re wealthy. The more money you make, the more some people will try to get. A lot of our clients come to us looking to protect their assets from judgments and liens. At the same time, they want to be able to continue to grow wealth for the rest of their lives. Yield is important to them, but so is legal protection.

That’s why many of our clients use life insurance and annuities as part of their asset protection strategy. Life insurance and annuities have the rare advantage of being protected from most judgments and liens. While laws vary from state to state, often these insurance proceeds are considered uncollectible assets. As a matter of policy, they also bypass probate.

If protecting your assets from creditors is your goal, then life insurance or annuities might be the ideal financial vehicle for you.

Skipping Probate with Contractual Obligations

One of the benefits of using insurance and annuities is that they bypasses probate. Most of your assets will go through probate when you pass away, with your will determining their final disposition. However, life insurance and annuities don’t do that. These are contractual obligations between you, the insurance company, and the beneficiary. As such, the funds from those policies don’t go into your estate. 

This is important because anyone who brings a judgment or debt against your estate is going to be able to use its value to prove you have assets to pay the case. Life insurance policies, for example, aren’t considered part of that estate in probate court and are uncollectible as a result. But life insurance doesn’t just protect your money when your estate is being settled. It can also be used to protect your assets when you’re alive. 


How Life Insurance Policies Protect Your Wealth

In the case of judgments and liens, collectible assets are any assets with a cash value that aren’t protected by law. For the most part, these assets are just about anything you can sell for cash. So property, stocks, bonds, and other investments are considered collectible assets. If you were to get sued by a creditor, those assets could be claimed to satisfy the judgment. 

There are a few things that sit on the “uncollectible” end of the spectrum. Among those are insurance policies and annuities. Annuities and life insurance policies are considered protected assets in many states in the United States. Different states may protect different amounts from these policies. In some states, the cash value of the policy is protected. In others, only proceeds paid to beneficiaries are protected. Finally, in the best states, all the funds from the policies are protected. 

However, if you’re in a state where life insurance policies and annuities are considered collectible, then you may want to consider the use of a trust. The trust helps to provide an additional layer of insulation to the account by removing the funds from your name. As long as the trust is irrevocable, most states have held that the assets in those trusts can’t be used to satisfy judgments or debts. 

Of course, the key to asset protection is preparation. Life insurance is one of those products that’s best purchased when you don’t need it. Using it as a part of asset protection is no exception to that rule. 


When Do You Need Asset Protection?

The answer to when you need asset protection is the sooner the better. Just about all of our clients have assets that need to be protected, even those who are middle class. While the basics in your life, like the home you live in and the car you drive, might be safe from collection, many of your investment and cash accounts aren’t. The same goes for any vacation properties. 

The key is to use life insurance and annuities to protect these assets before you ever need to. Once you’re the subject of a lawsuit, then moving those funds around could be impossible. In some cases, if someone has enough assets, the court will prevent them from being able to move them if a judgment is imminent. 

People tend not to plan for this because they think it’s unlikely. The issue is that we live in a very litigious society. The wealthier you are, the more likely it is that people are going to try to claim you owe them money. Even something as simple as someone tripping and falling in your yard or a former business partner claiming you stole clients could cost millions. No one ever expects to be the subject of a lawsuit or creditor claim, but the ones who plan for it tend to do better in the long run. 

We use life insurance and annuities as a way to protect clients’ assets during and after their lives. Our strategies help our clients reduce the risk of asset loss while ensuring they’re also building a legacy. For more information on our asset protection strategies, contact us today at 800-DIE-RICH.

source:  howardkayeinsurance.com