jasongilbertus - Tumblr blog

jasongilbertus · 11 days ago

Text

Smart Financial Moves Chapter 6: Navigating Family and Estate Planning

Family and Estate Planning

This is the sixth installment in our “Smart Financial Moves” series, exploring essential financial strategies for high-income individuals looking to build wealth efficiently.

In Chapter 5, we explored Insurance and Protection. This week, our focus turns to Estate and Family Planning.

Estate planning often feels like something to address “later.” It doesn’t deliver exciting returns and requires confronting topics like mortality and family dynamics.

However, estate planning isn’t about death—it’s about clarity and protection, allowing you to live with the confidence that your family’s future is secure.

When done correctly, it removes uncertainty and conflict, safeguarding your wealth.

We collaborate with estate planning attorneys and related professionals, but our role is advisory. We guide clients in understanding their options, coordinating their planning, and ensuring alignment with their larger financial strategy.

Must-Have Components

Many people wonder where to begin with estate planning. For those in their 30s and 40s—especially with expanding families and responsibilities—certain elements are essential.

The Foundation: Your Will

A will plays two key roles for families: naming guardians for minor children and determining asset distribution, which is particularly important for blended families or unmarried couples.

People often delay creating wills due to discomfort around mortality, but a will provides clear guidance during difficult times.

Always include backup guardians. Your first choice may not be available, and naming alternatives avoids disputes or unwanted court decisions.

Controlling Medical Decisions

Healthcare proxies—also called advance directives—designate someone to make medical decisions if you are incapacitated. These documents outline your preferences regarding life support and end-of-life care.

Stating your wishes clearly ensures the right people are empowered to make decisions in your absence.

The Often-Overlooked Essential

A Power of Attorney (POA) is critical, yet frequently ignored. It grants someone the legal ability to manage your finances if you become incapacitated. This includes paying bills, handling investments, or managing real estate.

Without a POA, your family could face major hurdles accessing essential financial resources in a crisis. It's inexpensive but offers powerful protection.

Revocable Living Trusts

For individuals with considerable assets who want to avoid probate, revocable living trusts are a practical solution. They help manage assets privately and efficiently, during both incapacity and death.

These trusts also simplify transitions and help avoid court involvement.

The Modern Challenge

Digital assets are an increasingly important—and often neglected—part of estate planning. Think crypto wallets and other virtual holdings.

For example, many early adopters of Bitcoin now hold significant assets. How do you ensure those are protected and transferred properly?

Our firm partners with BitGo, a leading custodian offering multi-signature protection for crypto. It’s a secure, institutional-grade solution we provide to high-net-worth clients with digital holdings.

Navigating Family Conversations

The documents themselves are important, but the real challenge lies in the conversations with family members. Discussions around inheritance and final wishes are emotionally sensitive and prone to misunderstanding.

Framing the Conversation

Approach matters. Framing the discussion as an act of care and responsibility helps.

You might begin with: “Let’s talk about this because I care about the family and want to make things easier for you and your siblings down the road.”

That tone sets a constructive stage. With our help as a neutral party, we can remove some of the emotional weight from the discussion.

Right Level of Transparency

It’s not necessary to disclose every financial detail. Sometimes, a broad overview—grouping assets into “buckets”—is enough.

These conversations can stir up complex feelings. The goal is to minimize surprises and promote open dialogue, not impose rigid directions. This approach fosters comfort and clarity.

Wealth Transfer Strategies

When it comes to transferring wealth efficiently, these are some of the most effective strategies we recommend to clients:

Annual Gifting

You’re allowed to gift $18,000 per recipient annually without affecting your lifetime exemption. Any amount above that applies against your lifetime gift exemption of $13.61 million (as of 2024), but no tax is owed—just a filing requirement.

Best used for: reducing your taxable estate over time. High-net-worth families can support children’s education or home purchases this way.

Example: A couple with $30 million in net worth gifts $18,000 to each of their three children and five grandchildren. That removes $300,000 annually from their estate—completely tax-free.

Grantor Retained Annuity Trusts (GRATs)

A GRAT allows you to place appreciating assets—like stock or business ownership—into a trust. You receive annuity payments for a set term (2–5 years), and any growth above the IRS “hurdle rate” transfers to your heirs tax-free.

Best used for: assets expected to appreciate significantly, like pre-IPO shares or private equity. Especially useful in volatile interest rate environments since GRATs can be reset and reused.

Example: $5 million in company stock placed in a three-year GRAT grows at 10% while the IRS rate is 5%. That difference—around $800,000—passes to your heirs tax-free.

Custodial Roth IRAs

To contribute, kids need earned income (W-2 or 1099). You can fund the lesser of their income or $7,000 into a Roth IRA.

This teaches real-world financial skills and leverages the power of long-term compounding.

Example: If your 16-year-old earns $6,000 from a summer job, that can go into a Roth IRA. At 7–8% growth, that could become $100,000 by age 40—tax-free.

Some clients even place their kids on payroll for legitimate work, providing earned income that enables Roth contributions.

Teaching Financial Stewardship

I personally teach my kids about money, and I encourage others to do the same. It’s never too early to start.

Starting Early with Real Money

We began with physical lockboxes to help them understand cash. Real bills and coins made abstract financial concepts tangible.

Age-Appropriate Progression

As they’ve matured, we introduced savings accounts (like Chase First Savings or Capital One), encouraged budgeting, and discussed spending habits.

My 14-year-old earns a stipend as a Sunday school teaching assistant. We regularly discuss how to manage that income—what to spend, what to save, and what it means to earn.

Making It Real

My wife and I are transparent about costs—groceries, sneakers, even inflation’s impact on daily spending. This instills awareness and shapes habits early.

They also buy things with their own money, like souvenirs on trips. These are valuable life lessons.

Our ultimate goal is to instill values like trade-offs, savings, and long-term thinking. With these principles, they’ll become responsible adults.

Update Your Estate Plan

Estate plans shouldn’t be static. Review them every 3–5 years or after major life changes.

Immediate Revision Triggers

Marriage or divorce

Birth or adoption of children/grandchildren

Business sale or purchase

Major asset or net worth changes

Change of state residence

Death or incapacity of key individuals (executor, trustee, guardian)

Changes in tax law (especially estate tax exemptions)

Regular Maintenance

Even if nothing major happens, beneficiary designations and financial accounts evolve. Review them periodically to reflect your current intentions.

As your children grow up, many clients revise trust provisions, update guardianship, or align inheritances with updated values and financial plans.

The Integration Piece

Estate planning is a foundational part of your financial strategy. It supports your ability to grow wealth securely.

When you know your loved ones are protected and your intentions are clear, you’re free to pursue opportunities—whether in business or investing—with greater confidence.

Estate planning, when integrated with tax and insurance strategies, provides total protection and peace of mind.

You don’t need perfection—just a well-structured plan that protects your family and your legacy without unnecessary complexity or expense.

For more insights and guidance, visit: https://jasongilbert.net/

Check out other chapters in my Smart Financial Moves Series here.