Estate Planning Strategies for High-Net-Worth Individuals

Estate planning is essential for those with significant assets. For high-net-worth individuals, a solid plan reduces taxes, protects what you’ve built, and keeps things running for future generations. The current estate tax exemption is set to expire in 2026,¹ so there’s added pressure to act now. Below, we’ll cover:

• Trust structures
• Gifting tactics
• Asset protection
• Planning strategies for passing on wealth

‍

Why Wealthy Individuals Should Prioritize Estate Planning

Is your estate large? Your tax bill might be as well. Estate planning gives you more control over what happens to your assets and reduces the share that goes to taxes. It also makes it easier for your family to handle things after you’ve gone. If you don’t have a plan, your estate could face confusion and high costs.

If you take action now, you can decide how your wealth is passed down, who’s in charge, and how your legacy continues. A thoughtful plan means making decisions that align with your values and goals. 

The Current Estate Tax Landscape

Estate tax rules are always changing, and those changes can have a big impact on families with large estates. There are currently generous federal exemptions in place, but those are set to shrink soon. Understanding the current limits and planning ahead will determine how much of your estate stays in the family. 

Federal Exemption Limits and Upcoming Changes

In 2025, the federal estate tax exemption is around $13.99 million per person.² However, starting in 2026, that amount will drop by about half unless Congress makes changes. This reduction could expose more estates to higher taxes. 

Planning for Asset Growth Before 2026

Now may be a good time to act. If you expect your assets to grow, using the current exemption before it drops can reduce future tax bills. One strategy is to transfer appreciating assets, such as real estate or business shares, now instead of later.

Core Trust Structures for High-Net-Worth Families

Trusts are one of the most useful tools in estate planning. They help manage how assets are passed down, offer privacy, and can reduce taxes. There are two main types: revocable and irrevocable. Each serves a different purpose, and many high-net-worth families use a combination to meet their goals. 

Revocable Living Trusts

A revocable living trust keeps you in control of your assets while you’re alive. You can change or cancel it any time you want. When you pass away, the trust takes over and handles the distribution of your assets without going through probate. That means fewer delays and more privacy for your family.³

Irrevocable Trusts and Their Advantages

An irrevocable trust is more permanent. You can’t easily change it after it’s set up. However, that’s also what gives it power. Once you move assets into the trust, they’re no longer part of your taxable estate, which can lower estate taxes. These trusts also protect assets from lawsuits or creditors and may help with qualifying for certain benefits. Compared to revocable trusts, they offer more protection but less flexibility.⁴

Specialized Types of Trusts for Estate Planning

In addition to basic trust types, high-net-worth individuals often use more specialized trusts to meet specific goals. These tools can support a spouse, protect life insurance proceeds, or make the most of tax rules. If your estate is large or elaborate, these strategies are worth considering.

Spousal Lifetime Access Trusts (SLATs)

A SLAT is a trust where one spouse makes a gift into the trust, and the other spouse can access the income or benefits. It removes the assets from the estate for tax purposes while still allowing a married couple to use the funds indirectly. This type of trust is helpful if you want to lower your estate size but still keep access to some of the money. ⁵

Irrevocable Life Insurance Trusts (ILITs)

An ILIT holds a life insurance policy, so the payout doesn’t affect your estate. This means your beneficiaries can receive the full value without it being taxed as part of your estate. ILITs are most commonly used to provide cash to cover estate taxes or to support heirs with liquidity. They need to be set up before the policy is issued, or at least well ahead of any expected changes. ⁶

Grantor Required Annuity Trusts (GRATs)

A GRAT allows you to transfer appreciating assets, such as stocks or a business interest, while keeping the right to receive income for a set number of years. Once the term ends, any remaining value goes to your beneficiaries, often with little or no gift tax. GRATs work best when you expect an asset to grow in value. They can be a wise way to shift future gains out of your estate.⁷

Qualified Personal Residence Trusts (QPRTs)

A QPRT lets you transfer a home to your heirs while continuing to live in it for a set period of time. During that time, you still use the house, but it’s no longer part of your taxable estate. After the trust term ends, the home goes to your beneficiaries. It’s a good fit if you want to pass on valuable property while reducing estate taxes. Just remember that you’ll need to plan around the trust’s timeline.⁸

‍

Gifting and Wealth Transfer Strategies

Giving assets during your lifetime is a great way to reduce your taxable estate and support your loved ones. These strategies allow you to pass on wealth while taking advantage of current tax rules. 

Annual Gifting and Lifetime Exemption Use

Each year, you can give up to a set amount, $19,000 in 2025,⁹ without triggering gift taxes. This is known as the annual gift exclusion, and it resets every year. On top of that, you can use part of your lifetime exemption to give larger amounts tax-free. Many families combine both options to transfer wealth gradually. It’s a simple but powerful way to shrink your estate over time while helping loved ones now.

Family Limited Partnerships and Business Entities

Family limited partnerships (FLPs) or limited liability companies (LLCs) are often used to pass down family businesses or investments. These structures allow you to maintain control while gifting portions of ownership to your heirs. They may also help lower the value of those gifts for tax purposes, thanks to validation discounts. That means you can transfer more wealth using less of your lifetime exemption.

Direct Payments for Medical and Education Expenses

The IRS allows you to pay someone’s medical or educational costs directly without counting them as gifts. To qualify, the payment has to go straight to the provider or school, not the individual. Grandparents often use this strategy to support a grandchild’s tuition or help with medical bills. It’s a tax-free way to give meaningful support without using up your gift limits.

Minimizing Taxes and Preserving Wealth

A strong estate plan doesn’t only focus on where your assets go, it also looks for ways to reduce taxes and keep more of your wealth in the family. With the right strategies, you can support the people and causes you care about while ensuring your plan stays tax-smart.

Charitable Giving Strategies

Giving to charity is a meaningful way to support causes you care about, and it can also come with tax benefits. Options like charitable remainder trusts (CRUTs), donor-advised funds, or private foundations let you give in a structured way. Depending on how you set it up, charitable giving may reduce your income, estate, or capital gains taxes. ¹⁰

Roth Conversions and Retirement Accounts

If you have traditional retirement accounts, converting them to ROTH IRAs can be the way to go, especially if you expect tax rates to rise. You’ll pay taxes on the conversion now, but future growth and withdrawals are tax-free. This can make things easier for heirs, who won’t owe income tax on the inherited funds. 

Protecting Assets and Planning for Long-Term Care

As your wealth grows, so does the need to protect it. Lawsuits, unexpected health issues, and long-term care costs can all threaten what you’ve built. That’s why asset protection and planning for future care should be part of your estate strategy. 

Asset Protection Trusts

An asset protection trust is designed to shield your assets from creditors and legal claims. These are typically irrevocable, which means you give up direct control once you move assets into the trust. However, you gain stronger protection in return. People in high-risk professions or those concerned about future lawsuits often use these trusts. When structured properly, they can keep key assets out of reach while still supporting your estate planning goals.

¹¹Insurance and Legal Protections

Insurance adds more protection. Umbrella insurance, liability coverage, and malpractice insurance can all protect your personal finances if something unexpected happens. Legal tools, such as powers of attorney and clear ownership structures, also play a role. Together with trusts, these strategies create a solid foundation that guards your wealth from various risks. 

Medicaid Planning with Trusts

If long-term care is part of your future, careful planning is a must. Certain irrevocable trusts help you qualify for Medicaid by removing assets from your name if done early enough. Medicaid has a five-year lookback period, so this strategy works best when it’s part of early planning. These trusts are often used to protect a family home or savings while still meeting Medicaid’s eligibility rules. 

Preparing the Next Generation

Passing on wealth is about preparing your family to manage it well. Teaching financial responsibility and keeping communication open avoids misunderstandings and preserves what you’ve built. 

Family Governance and Communication

Family governance refers to the systems and conversations that guide how your family handles wealth. This might look like regular meetings, written values, or agreed-upon rules for decision-making. It’s also essential to have open, honest conversations about roles, responsibilities, or expectations. 

Education and Financial Literacy for Heirs

Teaching the next generation how to manage money is just as important as leaving it to them. Consider formal education, mentoring, or involving them in the family’s financial decisions. Some families even set up “practice” trusts that let heirs manage smaller amounts first. The goal is to give them the skills and confidence to handle future responsibilities. 

Business Succession Planning

If you own a business, you must plan how it will be handed off. It might go to family members, employees, or an outside buyer. Regardless, succession planning involves choosing future leaders, setting up a transition timeline, and ensuring the business structure supports the change. Trusts and family partnerships can also be used to transfer ownership while keeping things steady. 

Working with Estate Planning Professionals

Estate planning can get complicated, especially when you’re dealing with large estates, tax rules, or family-owned businesses. That’s why working with professionals who understand the legal, financial, and tax sides of planning is essential. 

When looking for an advisor, ask about their experience with high-net-worth clients and elaborate estates. It’s also a good idea to review your plan often, either every few years or after major life changes. That way, you can adjust things as needed and stay ahead of any changes in the law.

Taking the First Step Toward Your Legacy

Estate planning is something that can benefit you and your family today. The sooner you start, the more options you have to protect your wealth, lower taxes, and pass down assets on your terms. With the 2026 exemption changes coming up, now’s a great time to review your plan and take action. 

Key Takeaways:

• Estate planning gives you control over how your wealth is handled and passed on.
• Trusts, gifting, and tax strategies can reduce estate taxes and protect assets.
• Planning early helps avoid delays, confusion, or unnecessary costs down the line.

Action Items:

‍