What Is a UHNWI and How Should You Estate Plan if You’re One?

Technically, ultra-high-net-worth individuals (UHNWIs) are considered to be those with a net worth of $30 million or more. It’s a fairly exclusive category—only around 580,000 people globally cross this threshold.

With high net worths to protect, many UHNWIs use tools such as trusts and gift tax loopholes to help manage their assets. Careful estate planning is required to ensure assets are passed on to heirs to contribute to generational wealth. While all estate planning tips that are applicable to UHNWIs might not be appropriate for others, anyone with substantial assets can likely benefit from them.

Estate Planning Concerns Related to Ultra High Net Worth

UHNWIs—as well as individuals that have very high net worths—often have unique estate planning concerns. They can include, but aren’t limited to:

  • Preserving wealth. Many individuals with ultra-high-net worths desire to preserve that wealth for future generations. They want estate planning options that protect assets now but also support the continual growth and responsible management of assets over multiple generations.
  • Minimizing tax liability. On average, only about 0.1% of estates meet the threshold for federal estate taxes. However, ultra-high-net-worth estates more than meet the threshold for these taxes, and other tax liabilities may also apply. Because of this, UHNWIs may be concerned with tax planning to reduce those liabilities.  
  • Maximizing privacy. Confidentiality can be a concern for anyone when passing on assets to others. High-net-worth individuals may be especially sensitive to privacy, as they may not want other family members, creditors, business partners, or others to know just how much wealth they are passing on. Estate planning that leverages trusts and other tools can help keep assets out of probate, which involves a public record.
  • Asset Protection.  Protecting and preserving wealth for yourself and your family is another common concern for UHNWIs.  Because the United States is one of the most litigious countries in the world, proper asset protection planning can protect wealth from law suits, creditor claims, a future divorce of an heir and potential gift, estate and generation skipping transfer taxes.
  • Engaging in philanthropy. Many people who have a lot want to give a lot to their communities or charitable organizations. During your life, you can oversee the mission and vision of this giving, but to ensure it falls within your desired scope and values after you’re gone takes solid estate planning.

Some other concerns that UHNWIs might have when approaching estate planning include governance and global asset management. Governance refers to using legal options such as trusts to create policies about how wealth should be managed and used. This can be especially important when leaving wealth to individuals who are not used to managing a lot of assets.

What Role Might Gifting Play?

Gifting can play a role in large estate management, as it reduces the amount of assets that must be passed to others during probate processes. It also allows someone with a high net worth to share their assets with others during their lifetime.

However, gifting should be approached with caution and a full understanding of the financial, legal, and tax ramifications. Without the right approach, large gifts can create serious tax issues for everyone involved.

Use of a Family Limited Partnership

One tool that UHNWIs might consider is the FLP. This consolidates family assets under a unique ownership structure that can reduce some burdens associated with probate and taxes. This is a fairly complex option that requires a lot of pre-planning and may involve more administrative time and expense than some other options. However, if you have more than $2 million in assets or your family holds numerous real estate assets, the benefits could outweigh those considerations.

Consider the Complexity of Your Family

For high-net-worth individuals who are concerned with leaving a legacy, family dynamics and complexity may be important. You may want to ensure, for example, that multi-generational wealth is passed on to your children, grandchildren, and great-grandchildren.

However, you don’t know what the future might hold for your loved ones and heirs. People may marry, divorce, and remarry, for example. Blended and non-traditional family units may evolve over the course of time. If it’s not clear how inherited assets are to be treated, your heirs may lose some of their wealth in divorces or other proceedings.

It is fairly well known that Cornelius Vanderbilt was one of the richest persons in the United States at the time of his passing. He had amassed a net worth of approximately $105 million when he died in 1877. But, according to “Fortune’s Children: The Fall of the House of Vanderbilt”:

“Within thirty years after the death of the Commodore Vanderbilt in 1877, no member of his family was among the richest people in the United States…. When 120 of the Commodore’s descendants gathered at Vanderbilt University in 1973 for the first family reunion, there was not a millionaire among them.”

Proper estate and wealth planning can prevent this tragic lost of wealth. Today’s estate & wealth planning and protection techniques can protect and preserve an estate. For example, a $1 million estate left to heirs through the right kind of planning can grow to be worth $10 billion over five generations. This is done by protecting the estate from taxes, divorces and creditor claims.

Good estate planning can protect your assets and ensure they stay with your family.

Consider Your Business Assets Too

Many high-net-worth individuals have a wide variety of assets, including business investments. Whether you own one or more companies or are a majority shareholder in an enterprise, these assets must be considered when you plan your estate.

You may want to consider succession planning, for example. What happens to businesses you own or manage if you pass away? If your business brand is part of your legacy, you may want to have a plan in place for it to be protected or to pass to someone you trust to manage it appropriately in the future.

Work With Experienced Attorneys to Protect and Pass on Your Wealth

It’s impossible to create a complete guide to estate planning for ultra-high-net-worth individuals. There are too many complex scenarios to consider, and too much relies on the unique factors associated with each individual or family.

However, you can see that the process is complex and that there are many legal, financial, and even social considerations to account for. Working with a legal team that is experienced in helping individuals with high net worths can help you make estate planning choices that protect your assets and your legacy. Reach out to the Law Offices of Boyd & Boyd, P.C., at 508-444-9688 to find out more about how we can help you achieve your long-term legacy goals.