Executive Estate Planning Simplified - Theorem Wealth Management

Client Login

Complete the required fields below in order to access this digital guide.

January 11, 2021  |  Finances

Executive Estate Planning Simplified

Follow us

As an executive estate planning is likely a highly stressful, and intricate endeavor. Because of the unique way you may be compensated as an executive, there are details to identify that not everyone else needs to focus on. Your accumulation of assets is more than likely in a variety of contexts including real estate, private equity or taxable investment accounts. Because these forms of wealth often come with complexities when transferring finances to your beneficiaries, it’s important to make a conscious effort to disperse your wealth properly. 

What is Estate Planning?

An estate plan clearly defines what should happen with your wealth and your physical belongings should you die or become incapacitated. The objectives of such planning include ensuring your beneficiaries receive most of your estate, paying the least amount of taxes on your estate and assigning guardians to any minor children, if necessary.[1]

What to Prepare

It’s true, every good plan starts from the very beginning stages, so let’s jump into the basics that every thoughtfully developed estate plan should consist of plans for your:

  • Property
  • Will
  • Health Care Proxy
  • Durable Power of Attorney
  • Beneficiaries
  • Revocable trust
  • Guardianship delegations (if applicable) 

Creating a Will

A will is the most common estate planning instrument. While it is the only legal way to appoint a guardian for your minor children, a will can also be used for other estate planning purposes and offers a great deal of control over how your assets will be distributed, and who your beneficiaries will be. The drawback of using a will for passing on assets, in addition to naming a guardian, is that wills are subject to probate, which can be lengthy, expensive, and public.

It’s always advisable to see an attorney about creating a will, particularly if you are using it to name a guardian for your children. An attorney can help you outline your wishes and if the care of your child is complicated or your child has specific needs, an attorney can ensure that a comprehensive plan is included. The selection of an attorney is very personal, so it may make sense to start by asking someone you know and trust. An important consideration is that wills and estates are very specialized areas of law; the attorney must be one who specializes in that area. A generalist may not have the expertise you need. Your financial advisor may be able to provide a referral to a local firm they’ve worked with.

Determining Your Health Care Proxy

A health care proxy is a document that appoints someone to make health care decisions on your behalf, and it can also express your wishes for what type of care you will receive. You can be as specific as you like – from treatments, to doctors and hospitals, to when you choose to stop receiving care – and anything else you choose to include. States vary on how they address these two issues.  In some states, you will need to combine the health care proxy with a living will that sets out your preferences for the medical care you will receive. Together, these are sometimes called an “advance directive”.

Other states have developed simple documents that combine both and do not require a lawyer. Massachusetts, for example, has created a Health Care Proxy form that is easily available online and when executed and witnessed is a legal document. When setting up your health care proxy, check to understand what’s available in your state. Your doctor’s office is a great place to start as they will be most familiar with your health situation and they have a stake in ensuring you have a treatment plan and someone to carry out the plan in place. If your state has created a Health Care Proxy, they may have the forms available. If your state does not offer this, you’ll need to speak with a lawyer.

Creating a Durable Power of Attorney

The third essential document is a durable power of attorney.  It’s called “durable” because it does not end if you become incapacitated, like a regular power of attorney does. Once you have appointed a healthcare proxy and specified your preferences for care and/or created a living will, you will need a durable power of attorney for finances. The durable power of attorney will need to be drafted by a lawyer.

This document empowers someone to make financial decisions on your behalf, including paying your bills and paying for your care. The person you select does not have to be an attorney but will be referred to as your “attorney-in-fact” or “agent”. If necessary, this person can hire appropriate professionals that will be paid from your assets.

Your best option, especially if you have a significant amount of wealth and assets to consider, is to work directly with an estate planning attorney in order to organize these details. They will assist you in addressing these aspects of your finances as well as discussing any complicated tax strategies in your plan. 

Focus on Your Taxes

During your lifetime there are a number of different taxes that you’ll want to keep in mind. For example, the generation-skipping tax (GST) is applied in addition to either gift tax, if you’re still living, or estate tax, when you’ve passed. 

One way to avoid the GST is to use 529 plans for your family members by gifting your grandchildren with educational funds. You’re able to use this plan for each child and a five-year multiple of the current gift tax exemption to make a lump-sum contribution.[2]

Keep Insurance in Mind

If you have life insurance it’s important to keep in mind that if the funds are made payable to your estate, they will be subject to any estate tax your other accumulated wealth will eventually be subject to.[3] Make sure your beneficiaries are updated on all forms of insurance in order for the proceeds to go straight to them when the time comes. 

You’re Not Alone

Estate planning can be difficult for anyone, let alone an executive such as yourself. Make sure you take the time to have conversations with family and financial professionals about how to go about it efficiently. The last thing you would want is for a large portion of your estate taxed at incorrect (higher) rates. Developing a plan with an advisor that addresses your estate and legacy after you’re gone can be hugely beneficial for you and your loved ones. 

Written by Johnathan Rankin

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.– Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. –  Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. Third party posts do not reflect the views of Theorem Wealth Management or Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and have not been reviewed for completeness and accuracy. All further communications from this representative must be sent from and received by [email protected] .For additional information, please refer to one of the following consumer websites: www.FINRA.orgwww.SIPC.org.

Share this article

Stay up to date.

Subscribe to our blog and get up to date on what’s happening today, get useful financial tips and stay informed on Theorem’s latest news.