Avoiding wealth depletion from generation to generation

On Behalf of | Jan 26, 2017 | Estate Planning |

Like many residents of Woodland Hills, you work hard throughout your life with the intention that your family will enjoy the fruits of your labors even after you are gone. When many come to see us here at The Law Offices of Alice A. Salvo for assistance with estate planning, their thoughts are often centered on the well-being of their children. Yet what about their grandchildren? Or their grandchildren? If you accumulate extensive wealth throughout your life, you may reasonably expect to able to provide financial security for many future generations of your family. That may only be possible, however, if you do it right.

Without considering some form of tax avoidance, your wealth could be considerably reduced by the time that it reaches your third of fourth generations. As your taxable assets pass from generation, each pays the estate tax rate. Assume you leave a $10 million estate to your children. Whatever amount is above the estate tax threshold ($5.49 million for 2017 according to Forbes Magazine) is subject to a 40 percent estate tax rate. Given the amount in excess is $4.52 million, your tax bill would be $1.804 million, lowering the total amount they receive to $8.196 million. If that is the amount they pass to your grandchildren, the estate tax bill to be paid would be $1.0824 million. This would continue down the line.

You may be able to avoid having any assets that come in above the exemption taxed by creating a dynasty trust. Doing so ensures that the amount of principle you leave remains untaxed from generation to generation. According to Wells Fargo, assets eligible to be included in a dynasty trust are:

  •          Marketable securities
  •          Real estate
  •          Business interests

You can learn more estate planning strategies by continuing to explore our site. 


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