Estate Planning
November 21, 2023

8 Things You’re Doing Wrong With Your Ultra High Net Worth Legacy Planning

Stewart Willis

Building and managing immense wealth can consume the lives of ultra-high net worth individuals (UHNW). However, planning the legacy you want to leave behind is equally critical and often overlooked.

Having a sound UHNW legacy plan secures future generations' well-being and serves as a safeguard for all the hard work you've put in throughout your lifetime. Unfortunately, there are many common mistakes that many UHNW individuals tend to make during ultra-high net-worth legacy planning.

1. Lack of a Comprehensive UHNW Plan

Ultra-high net worth legacy planning must start with some goals to develop a plan. UHNW individuals often overlook the importance of having a comprehensive legacy plan. Many people mistakenly believe that their wealth alone will be enough to solve any future problems—that really isn't the case.

Without a well-defined strategic roadmap and estate planning strategies for high net-worth individuals, you can incur unnecessary fees and expenses that can drain you. It is essential to have a clear plan to avoid any complications and ensure smooth implementation.

The solution involves a team of professional advisors, such as lawyers, accountants, and financial planners. Their combined expertise will give you a comprehensive approach to UHNW legacy planning, covering wills, trusts, tax considerations, and other important aspects.

2. Overlooking Tax Implications

Taxes are everywhere—almost every financial transaction you make involves. Why shouldn't your long-term UHNW legacy plan cater to them? There are many things to consider from federal estate taxes, state estate planning and inheritance taxes, and more. Ignoring a tax strategy can lead to the following:

  • hefty penalties
  • decreased estate value
  • unnecessary tax burdens for heirs

If you have assets outside the United States, this can complicate your tax situation even further. UHNW individuals must understand and comply with global tax obligations to avoid severe consequences. Estate planning for ultra-high net-worth individuals shouldn't neglect these complexities.

Regularly consulting with certified tax professionals can help you make better decisions about managing your assets. These advisors have the expertise to guide tax-efficient structures and strategies to reduce tax liabilities effectively.

3. Ignoring Family Dynamics

Family is often complicated—adding wealth and assets like real estate to that dynamic can cause unwanted tension and friction. It's even worse when emotions are involved, and no objective third party manages everything. Failing to consider family dynamics can unintentionally breed resentment, competition, and distress.

Ignoring family dynamics and potential disputes can derail the vision for the legacy of UHNW individuals. Many feel conflicted about having a family member or friend as a trustee or power of attorney. They often opt for a third-party fiduciary to responsibly manage their estate.

This will provide clear guidance and maintain open communication to avoid any family strife that may arise, even with the best intentions for successful ultra-high net-worth legacy planning.

You could also take the initiative to engage in open and meaningful discussions with your family members, including the younger generation. It is important to communicate your intentions and expectations clearly to them. Implementing family governance structures with a family office can achieve positive outcomes.

4. Not Updating the Your UHNW Legacy Plan

Many people make a legacy plan but fail to keep it updated, rendering it useless when needed. As time passes, it's natural for our desires and circumstances to change. Unfortunately, if your will or legacy plan is outdated, it may not accurately reflect your current wishes. This can lead to emotional distress and potential conflicts among your loved ones.

Senior couple speaking to an estate planner

It's important to regularly review and update these documents to ensure that your intentions are clear and that everyone involved can find peace of mind. Stay on top of changes in family structures and tax laws by regularly reviewing and updating your estate planning strategies as a high net-worth individual.

To keep your legacy plans practical and up-to-date, you need to regularly review and update them. It is recommended to do so every few years or after significant life events like marriages, births, or major financial changes. By taking these proactive steps, you can maintain control over your future and ensure that your plans align with your current circumstances.

5. Failing to Educate Heirs

You might hear about UHNW families that go bankrupt or near bankruptcy due to poor financial management. This is often due to inadequate preparation and education of heirs regarding how to effectively manage and preserve wealth. Financial literacy is an absolute must relating to ultra-high net-worth legacy planning.

Start your young family members' financial education early to set them up for success. This can involve teaching them the basics of financial literacy. By taking these proactive steps, you can ensure they acquire the necessary skills and knowledge to navigate their finances confidently.

6. Not Considering Charitable Giving

Understandably, many individuals with significant wealth deeply desire to make a positive impact. However, many ultra-high net-worth families overlook the opportunity to include philanthropy in their ultra-high net-worth legacy planning. By incorporating philanthropy into their plans, they experience the joy of giving back and unlock potential tax benefits that can further support their charitable endeavors.

Consider establishing foundations or donor-advised funds as part of your ultra-high net-worth legacy plan. By doing so, you can ensure that your wealth contributes meaningfully to society while potentially enjoying tax benefits. It's a wonderful opportunity to leave a lasting impact and give back to causes that matter to you.

7. Overcomplicating or Underusing Financial Structures

It’s great to have robust structures in place to protect your wealth. Overcomplicating these can make them challenging to manage, understand, and execute. However, you can underutilize or misuse structures without the proper guidance for ultra-high net-worth legacy planning. There is a time and place to use estate planning strategies for high net-worth individuals, like grantor-retained annuity trusts or an irrevocable life insurance trust.

Sometimes, simplicity often brings clarity. The right expertise will help you to effectively use structures to manage and pass on wealth to the next generation. This approach will ensure a smooth transfer of wealth and effective communication for years to come.

8. Over-reliance on a Single Advisor

It is essential to have a trusted advisor, but relying solely on one main advisor can be risky with your ultra-high net-worth legacy planning. This approach can limit your perspective, potentially causing missed opportunities, mismanagement, or fraud in extreme cases. To mitigate these risks, diversify your advisory team. While maintaining a primary advisor, seek input from other experts for a well-rounded view of your ultra-high net-worth legacy planning.

Work with a team that has specializations in the areas you require. This will give you a holistic view and outlook of your estate and legacy. Remember, your UHNW legacy plan is something you are building for future generations.

Build an UHNW Legacy Plan for the Future

At Asset Preservation, we take pride in being a comprehensive wealth management firm. What sets us apart is that we offer all-in-one financial solutions, including financial planning, tax planning, and estate planning. With us, you can access a variety of services under one roof for your convenience and peace of mind. Let’s work together to build a legacy plan.

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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

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