When you hear the term “wealth preservation” you may wonder what it’s all about. Why would your wealth need to be preserved? Is there an expiration date?
While it could seem as though you have reached the promised land, as it were, once you have accumulated a significant store of wealth you do in fact have to consider the sources of asset erosion that exist. One of these is the federal estate tax.
It would be possible for a considerable fortune to be largely consumed by federal death taxes. At the current time the top rate of the estate tax is 40%, and there is a $5.25 million exclusion. That means there is no tax on the first $5.25 million of net asset value you own. However, the president has proposed a 45% top rate and a $3.5 million exclusion to be put into place in 2018.
The thing to remember about estate taxes is that the law continues to change. You must be vigilant. If you were to leave behind assets that exceed the exclusion to your children the estate tax could be applicable if no steps were taken to gain estate tax efficiency. Assuming they are successful at building on that wealth they may be passing along assets in excess of the exclusion amount to their children, your grandchildren.
Once again the estate tax would be imposed, and this can potentially continue for generations until the only thing left is the amount that is excluded from the tax.
When you recognize that you have achieved your financial goals you may first want to celebrate. You have certainly earned that right. The second thing to consider is wealth preservation, and this is something that you should discuss with a licensed estate planning attorney.
Author, President and Founding Attorney
Parman & Easterday