Understanding Estate Planning: Preserving Your Wealth and Legacy for Future Generations

Estate planning is an important component of your financial plan. Estate planning helps ensure that your assets are passed onto the heirs and beneficiaries of your choosing. Having a proper estate plan does not just happen. You need to take the proper steps to implement your estate plan.

The Benefits of Estate Planning

Estate planning goes beyond just having a will that reflects your current wishes for assets covered by the will. There are a number of assets that go beyond a will, however.

If done properly, estate planning can help ensure that your assets are passed on to your family members or other heirs. A will is the first part of the process. The will should spell out who inherits which assets. It should then be reviewed and updated periodically to reflect any changes in your circumstances.

Some assets may need special treatment in estate planning beyond what a will can provide. For example, retirement accounts such as IRAs or 401(k)s pass by beneficiary designation. These designations override anything that may be mentioned in a will. The same applies to life insurance policies and annuities.

Estate planning can also include the establishment of a trust, the use of powers of attorney or advanced healthcare directives. Whether any or all of these strategies are desirable will depend upon your unique situation.

Beyond simply distributing assets upon your death, proper estate planning should take tax planning into account, both during your lifetime and upon your death. A good estate plan also establishes provisions to protect the interests of heirs and beneficiaries. Estate planning can be used to support the educational needs of children or grandchildren. Estate planning is a good way to incorporate your charitable goals for some of your assets upon your death as well.

Creating a Will

A will is the foundation of most estate plans. A will should indicate where assets that are not distributed by other means are set to go to the heirs that you intended. Assets not covered by a will or another distribution method will potentially go through probate and be distributed according to any rules your state has in place. This may or may not be in accordance with your wishes.

It is also important to review your will periodically to ensure that it is up to date and that it both reflects any life changes that might come up as well as covers your current assets.

Understanding Trusts

A trust is a fiduciary arrangement that allows a trustee to hold assets on behalf of the ultimate beneficiaries. There are several varieties of trusts and they can help accomplish a number of estate planning goals.

Assets in a trust can pass to beneficiaries outside of probate, avoiding the time delays and costs associated with probate. Additionally, a trust can offer several other advantages, including:

  • Control over your wealth by specifying in the terms of the trust who receives each asset and the timing of those distributions.
  • Protection of the trust assets from creditors or a beneficiary who is not ready to manage their inheritance.
  • Privacy; probate is a public process.

There is a wide range of types of trusts with different structures, so there is probably one that is right for your estate planning needs.

Tax Planning and Wealth Preservation

Tax planning can be a key part of the estate planning process. Under the Tax Cuts and Jobs Act, the current lifetime estate tax exemption for 2023 is $12.92 million for an individual and $25.84 million for a married couple. These levels are eligible to increase for 2024 and 2025, but after 2025 there is a sunset provision in the law that will drop the lifetime exemption back down to the old levels, adjusted for inflation. This could be in the $6.5 -$7.0 million range per person.

For those who might be impacted by these sunset provisions, it could make sense to make some lifetime gifts during the 2023-2025 time period. You might also consider diverting some assets to a trust that will get those assets out of your estate.

Charitable Giving and Legacy Planning.

For those who are charitably inclined, there are a number of charitable giving opportunities that can be incorporated into the estate planning process.

One option is establishing a private foundation. Money donated to the foundation is tax deductible during your lifetime and is then out of your estate and not subject to any estate taxes.

There are various charitable trusts that can also be established. A charitable remainder trust (CRT) offers the ability to contribute assets to the trust with a partial charitable deduction. If appreciated securities are donated, there are no capital gains taxes to be paid. The donor receives payments during their lifetime with the rest reverting to the charitable beneficiaries upon the donor’s death.

Charitable bequests can also be made as part of your estate plan. These bequests will not be subject to any estate taxes.



Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.