If you have a high net worth, you probably already know how critical it is to have a fully realized financial plan that you revisit regularly. Yet high net worth individuals are not immune to common wealth management mistakes. Because your portfolio is likely complex, it can be confusing, and you stand to lose quite a lot if you miss certain key factors. Some of the most common mistakes that high net worth people tend to make are in the areas of estate planning.
The primary objective of estate planning is providing for your family after your death. Yet your estate may be complicated, making it vital to sit down and work your way through the fine details.
Common estate planning mistakes include:
Mistake #1. Leaving family members in the dark
While it isn’t a comfortable subject, your family members need to understand your plan. This is especially important if you name one or more as executors, who will have responsibility for putting your plan into action. But even those who will not play an active role in executing your plan should be apprised of your intentions. This can help avoid a family feud and even litigation after you pass.
Mistake #2. Not fully planning asset distribution
Naming beneficiaries for each asset is step one, but you also need to ensure that each asset is distributed in a way that minimizes the beneficiary’s tax obligations. If a family business is involved, you must also consider the estate tax implications of transferring ownership, and draw up a detailed plan for the distribution of business assets.
Mistake #3. Not treating your estate as a whole
Some high net worth individuals work with a variety of wealth management advisors, giving each responsibility for a portion of their estate plan. Yet when you pass, your estate will be considered a single entity. It is vital to work with a single advisory team that can keep an eye on the entire estate plan as well as each subset.
Mistake #4. Over- or under-using trusts
Some high net worth individuals use trusts for the majority of their estate plans, while other fail to use them at all. Trusts are a valuable tool, but each type of trust comes with its own advantages and disadvantages, and trusts do not, on their own, constitute a full estate plan. Work closely with an advisor who has an encyclopedic knowledge of trusts and how they fit into an overall plan.
Mistake #5. Failing to name the best executor(s) or trustee(s)
The job of executor or trustee is extremely complex, and those chosen have a tremendous amount of responsibility. Take the time to discuss the topic with your wealth advisor and your most trusted loved ones. Be sure that you select only those who are interested in taking on the position, and have both the personality and the sense of duty to complete the tasks to the very best of their ability. You can name an attorney or other professional trustee rather than a loved one, if desired.
Mistake #6. Not reviewing your estate plan
Estate plans are living documents. Tax codes change frequently, and life events such as marriages, divorces, or changes in finances could render an entire plan outdated. Review your plan every three years, and after every major life event.
CORDA Investment Management, LLC, is an investment advisory firm that provides wealth management services for clients nationwide. CORDA’s headquarters is in Houston, and the firm also has offices in Austin and Dallas. If you are ready to begin a long-term professional relationship with a proven investment firm, please contact CORDA today at https://cordamanagement.com or by phone at (855) 439-0665.