Sophisticated wealth and estate planning: Addressing the blind spots

Individuals who operate at the highest levels of performance like investment bankers, senior law partners, leading surgeons or other highly specialized professionals, and those who have built extraordinary wealth – founders, executives and private investors, generally have one thing in common when it comes to wealth and estate planning. These individuals are more likely to delay or fail to delegate parts of their wealth and estate planning strategy. Many may think that everything is handled - the legal documents exist, the trust is drafted, the boxes are “checked.” However, as your wealth grows, $10 million, $50 million or even $100 million, wealth and estate planning become more than a legal exercise; they become strategic.

Here are five common and crucial wealth planning blind spots for high-income individuals:

1. Outdated or incomplete estate plans

Most high-income professionals have some variation of an estate plan – a will, maybe a trust or power of attorney designations identified. These are important, but for individuals with $10 million or more in assets, especially considering restricted stock units, deferred compensation or private business interests, those basic documents are usually not enough.

For example, imagine a couple who earns over $2 million in annual gross income. With the demand of their professional lives, they haven’t updated their estate documents in nearly a decade. In that decade, tax and legislation laws have changed, their investment portfolio has grown exponentially, their children have married, and they have welcomed new grandchildren. You can imagine how outdated their previously drafted estate plan could be after a decade.

Our team would suggest revisiting their wealth and estate plan regularly, especially after major life events. Periodically revisiting an estate plan can ensure that your plan is aligned with your current values and increase the chance of reducing exposure to income and estate taxes. It also affords you the opportunity to create a clear multi-generational strategy to increase the likelihood of generational success without entitlement.

2. No coordinated tax strategy

When you’re in the top 1% of earners, taxes are likely your single biggest lifetime expense. Yet countless professionals miss major opportunities to plan beyond annual returns.

For example, how often and how much of my stock options should I exercise? Should I sell my restricted stock units immediately upon vesting, or should I hold for a year to potentially take advantage of more advantageous capital gains taxes? What is the impact of contributing to my employer sponsored 401k? How about my individual retirement account (IRA)?

Most people don’t have time to research strategies around these topics, let alone implement them — and that’s where a wealth advisor steps in. A wealth advisor can coordinate with your CPA, your attorney and your internal team to ensure everyone is collectively devising the best strategy.

3. Philanthropy that’s generous, but not strategic

You may already give generously, as many high-earning professionals do. But far too often large checks are written prior to Dec. 31 without a plan.

Additionally, when giving, should you give cash, securities from your brokerage account, or, if you’ve reached required minimum distribution (RMD) age, what is the benefit of giving from your IRA?

If you’re giving material amounts to causes you care about, it may be time to explore the following charitable techniques:

• Donor-advised funds allow you to give appreciated stock and control distributions over time.
• Private foundations let you build a family legacy around philanthropy.
• Charitable remainder trusts can provide income and tax efficiency.

Charitable giving, beyond random and/or uncoordinated annual donations could meaningfully reduce your income and estate tax exposure and align with your long-term legacy goals.

4. No exit strategy for career or liquidity events

For physicians approaching retirement, partners anticipating a buyout or bankers planning for deferred compensation payouts, timing is everything. Without coordinated planning, wealth can be eroded by taxes, poor distribution decisions or lack of integration with estate documents.

Here’s a scenario: A high-earning professional has a significant deferred compensation payout approaching, but they haven’t modeled the tax impacts across multiple years. If they were to proactively adjust their portfolio strategy and integrate trust planning in advance, they could likely reduce their overall tax liability and position their assets more favorably for the long term.

5. Neglected insurance planning

Many high earners assume they’re self-insured — and in some cases, they are. But insurance isn’t just about protection. For ultra-high-net-worth clients, it can be a strategic tool for liquidity, estate tax coverage and asset transfer.

Especially in professions where career-ending disability or early retirement is a possibility, revisiting your insurance structure (life insurance, property and casualty insurance, health, disability and even long-term-care insurance) isn’t a luxury — it’s a safeguard.

Sophisticated wealth demands sophisticated planning

The blind spots above could be avoided with the right planning and coordination. A high-net-worth individual’s financial plan should address tax strategy, philanthropic intent, family dynamics, business succession and long-term liquidity planning. In short, as your wealth becomes more complex, so must your planning.

And, at a certain point, traditional wealth and estate structures may no longer be sufficient. When assets span closely held businesses, real estate portfolios, concentrated stock positions and multi-generational trusts, lack of strategy can put tens of millions at risk.

Planning is not just about assets, but about intentions. Consider asking yourself the following:

• What impact do you want this wealth to have on your family, now and 30 years from now?
• What kind of control or flexibility do you want for future generations?
• What are the causes or institutions you want to meaningfully support now and into the future?

Again, a wealth advisor can help you translate your vision into coordinated action by aligning attorneys, CPAs, insurance specialists and investment teams into a cohesive plan.

The window for proactive planning may be closing

Sophisticated planning, coordination and a cohesive plan are more important than ever, as we are near a critical inflection point in tax policy. The current federal estate tax exemption, $13.99 million per individual, is scheduled to revert to roughly half that amount at the end of 2025. That means a married couple could lose the ability to transfer over $14 million tax-free if they don’t act soon.

This is an opportunity to:

• Maximize the use of spousal lifetime access trusts
• Move appreciating assets out of their estate
• Lock in valuation discounts while still retaining investment control

These aren’t cookie-cutter solutions. They require foresight, precision and deep coordination. This kind of planning is thoughtful and uniquely personal. That’s why it’s best to approach it with the same level of discipline you applied to building your wealth in the first place.

Get started today

If you haven’t revisited your wealth or estate plan in the past few years, or if you’ve never had a bespoke financial plan modeled as part of a larger strategy involving taxes, philanthropy and family leadership, now is the time.

Our advisors work with clients to ensure that nothing is overlooked, opportunities aren’t missed, and no intention is lost in the fine print. If you’re ready to have a more strategic conversation about your financial future, connect with our team, and our advisors can help you take a step back and look at the full picture.

This information does not constitute investment advice and is not an offer to buy or sell a security. The material is provided for general information and educational purposes and is based on information provided to us by sources deemed to be reliable. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. Past performance is no guarantee of future results and asset values will fluctuate with changing market conditions. There is no guarantee that the views and opinions expressed in this document will come to pass. Investing in the market involves gains and losses and may not be suitable for all investors. All investments are uninsured and can lose value. AI (artificial intelligence) was utilized to assist in the creation of this marketing piece.

Baker Tilly Wealth Management, LLC (BTWM) is a registered investment advisor. Reference to registration does not imply any particular level of skill. BTWM does not provide tax or legal advice. BTWM is not an attorney. Estate planning can involve a complex web of tax rules and regulations. Consider consulting a tax or legal professional about your particular circumstances before implementing any tax or legal strategy. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought.

Baker Tilly Wealth Management, LLC is controlled by Baker Tilly Advisory Group, LP. Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms.

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