Matching Structures to Net Worth

Estate planning scales with the balance sheet. Layering on irrevocable trusts before you need them burns money and flexibility; ignoring them once you are over the exemption hands 40% to the IRS. Use net worth as the trigger.

Table 23.1: Estate Structures by Net Worth

Net worth / situation Priorities and structures Net worth / situation Priorities and structures Net worth / situation Priorities and structures Any adult Will, durable financial power of attorney, advance healthcare directive with HIPAA Net worth / situation Priorities and structures authorization, current beneficiary designations. Minor children: guardian nominations and term life sized to raise them. life sized to raise them. Under ~$1M, owns a home or has minor children Add a funded revocable living trust life sized to raise them. (probate avoidance plus a successor trustee for incapacity), a pour-over will, TOD/POD coordination, and a personal umbrella liability policy. coordination, and a personal umbrella liability policy. ~$1M–$14M (under the federal exemption) Add entity segregation—an coordination, and a personal umbrella liability policy. LLC per rental or operating business; an ILIT if heirs will need liquidity; watch coordination, and a personal umbrella liability policy. for state estate tax (often $1M–$5M thresholds) and use a bypass trust to capture both spouses’ state exemptions; consider a DAPT for liquid wealth. spouses’ state exemptions; consider a DAPT for liquid wealth. Over $15M, or trending there Begin active estate-tax reduction now, while the asset is spouses’ state exemptions; consider a DAPT for liquid wealth. small: annual and lifetime gifting, SLAT s, GRAT s, sales to an IDGT, a spouses’ state exemptions; consider a DAPT for liquid wealth. QPRT for the residence, and a dynasty trust funded with allocated GST exemption. spouses’ state exemptions; consider a DAPT for liquid wealth. Decide deliberately between portability and a bypass trust. Use PPLI for tax-efficient insurance. insurance. $50M+ / multi-generational Add a family office, directed and situs trusts (South Dakota, insurance. Nevada, Delaware), possibly a private trust company, perpetual dynasty planning, and a structured philanthropy program (donor-advised fund, CRT, or private foundation). philanthropy program (donor-advised fund, CRT, or private foundation).

The tiers are cumulative: each level keeps everything below it. And the single highest-leverage move is timing—a $3 million company gifted into a dynasty trust today, before it becomes a $30 million company, transfers the entire $27 million of growth out of your estate for the cost of $3 million of exemption.