ESTATE PLANNING SERVICES & INVESTMENT STRATEGIES
FOR CORPORATE EXECUTIVES

When I started in the financial services industry, the estate tax exemption amount was around $600,000—a far cry from the current $11.2 million estate tax threshold.

But, I’m getting ahead of myself.

Before we can even begin to discuss how to best plan for estate tax exemption amounts for your financial situation, we need to start with the basics: How would you like your assets distributed, and to whom?

Many times, when we ask these basic questions as part of our estate planning services, executives find that they need to revisit and update their estate plan to reflect changes in their lives. It’s also not unusual to find executives who haven’t approached the basics at all. This is nothing to be ashamed of—in fact, it’s completely understandable. After working 60-plus hours a week, the last thing you want to discuss is estate planning.

The topic, however, is crucial because all of the wealth you are working so hard to accumulate means nothing if you can’t direct where and how it is ultimately distributed. Here’s a closer look at our process for providing estate planning services to corporate executives. We’ll also dive into how we use your personal priorities and goals to determine the estate planning investment strategies that make the most sense for your financial situation.

What are your priorities? This is the first question we ask when sitting down to discuss estate planning services with you. If we know and understand you and your family’s priorities, we can develop a game plan from there. If you can’t pinpoint the driving forces behind what you’re doing, it becomes somewhat difficult to create a custom estate plan. Some advisors may throw out different tax-advantaged estate planning strategies. These are great, but ultimately void if you haven’t identified the things most important to you.

Here are a few examples of ways we’ve helped clients implement estate planning strategies around their priorities. You may be able to relate to one or a few of them.

“I want to be sure my special needs child is cared for after I’m gone.”

If you have a child with special needs, a special needs trust may be of benefit to you. This is something we have experience helping clients establish. A special needs trust is an estate planning tool that allows your child to qualify for federal benefits without spending the assets you have gifted to them. If your child were to inherit money outright, they would have to spend the money down before qualifying for federal aid, unless a special needs trust is set up to protect the assets ahead of time. This type of estate planning service allows parents of special needs children to approach your finances with a sense of confidence, knowing that your child will be taken care of even when you are gone.

“I need some retirement income for myself and my family, but I also want to leave something to charity.”

Many top-level executives I work with are charitably inclined. This is certainly a factor when discussing estate planning strategies. We’ve worked with many clients who want to give charitably, but also require a portion of their assets for retirement income. These situations are best suited for use of a charitable remainder trust.

A charitable remainder trust allows you to generate income while you’re alive. When you pass away, the remainder of the assets in the trust are donated to a charitable organization or organizations of your choice. To establish your charitable remainder trust, we help you leverage assets that have appreciated over multiple years. This type of estate planning tool also offers some tax benefits, including reducing your income tax while you’re alive and, ultimately, helping your family reduce or avoid estate tax when you pass away.

“I want to ensure I leave plenty for my children.”

I’ve met many top-level executives who have been frugal their entire life. So when they get to retirement, they don’t really know how to spend their money. In addition, many are concerned about leaving plenty of money to their children, so the thought of spending any of the money they’ve saved leaves them feeling worried that they won’t have enough to pass on.

If you fall into this category, a good solution may be to establish a life insurance trust that can help ensure money is left to your children. This can alleviate the anxiety of not leaving enough behind for your heirs. It also offers some tax benefits to your heirs. This tool is an effective way to earmark funds for estate planning while freeing up capital for retirement income or spending.

Once we understand your estate planning priorities, we take a look at your four basic estate planning documents:

• Will: A legal document that defines your intentions regarding the distribution of your property and the care of minor children.
• Trust: A fiduciary relationship in which you grant a trustee the right to hold the title to a property or other assets for a beneficiary.
• Healthcare directives (also known as a living will): A legal document on which you specify what actions should be taken for your health if you are not able to make decisions on your own because of illness or incapacity.
• Power of attorney: A document that gives authority to a person to act for you in legal or financial matters.

Many times, if an executive has done some previous estate planning, we find that their documents aren’t up to date with their current wishes. Here’s an example:

“I’m remarried. How do I ensure my spouse and children are my heirs?”

We worked with a client who was in his second marriage. When he came in to see us, we discovered he hadn’t updated his estate planning documents to remove his former spouse and include his current spouse. We helped him ensure his current spouse and biological children would be taken care of in the event of his death. As a high-earning individual, this is something that you want control over, rather than relying on probate courts and outside parties dictating where your capital goes.

As illustrated above, we can help you ensure your planning documents reflect your current wishes and life. It’s always important for our team to work in conjunction with your estate planning attorney, as well as your CPA or tax advisor, when helping with estate plans. This is one of the most important aspects of the planning process—getting everyone involved with your estate plan to focus on what you want to happen with the wealth you have accumulated. This cooperation produces the best possible outcome for you.

In addition to the strategies already mentioned, there are other investment strategies corporate executives can employ. As part of our estate planning services, our team develops strategies that account for your priorities. We then help you implement those strategies to meet future goals.

One recurring theme we see among our clients is the large amount of concentrated stock built up in their estates. Many times, this is the result of working as a corporate executive for many years and being offered employee stock options year after year. The accumulated wealth that this stock represents is a great problem to have. After taking into account your investment strategy and your current asset allocation, determining the best estate planning strategy for your stock is the next logical step.

Many executives, and advisors for that matter, fail to account for the step-up basis that your heirs receive when they inherit stock from you. If you pass away while owning appreciated assets, such as company stock, your heirs will inherit the stock and receive a new cost basis. This is known as a step-up basis.

For example, if your cost basis for the stock was $10,000, but the stock is now valued at $100,000, your children or other heirs would receive the stock with a new cost basis of $100,000. This is much more favorable than selling the stock during your lifetime and paying the capital gains tax on $90,000, the appreciation. You could gift the stock to your children during your lifetime as well, but a better estate planning strategy might be to allow them to inherit the stock when you pass away and gift them cash while you are still alive.

It is important to note, however, that the same doesn’t hold true if you are considering gifting the stock to charity. In that case, you might consider other charitable gifting strategies.

If you’re concerned about reducing your estate to fall below the federal estate tax exemption threshold, there are alternative estate planning strategies that can eliminate or reduce estate taxation for a portion of your assets.

For example, a few years ago, we helped a client utilize $500,000 of excess savings to purchase a $6 million second-to-die life insurance policy.

The client approached this strategy as an estate investment. If both he and his spouse lived to age 90, the policy still returned 5% annually with a tax-free benefit to their children. If they passed away before 90, the annual return would be greater. By leveraging an irrevocable life insurance trust with this strategy, you can effectively lower your overall taxable estate, as well.

These are the types of customized and creative estate planning strategies we can help you implement once we have identified your priorities.

This is why it’s important to work with a wealth manager who gets to know you before making any recommendations. Whether you have a special needs child, or you have saved so well for retirement you don’t know how to start spending your money, our estate planning services can ensure the assets you’ve worked so hard for are distributed according to your exact wishes.