Two Sides of the Same Coin: Planning For the Wealthy and Non-Wealthy Client

Not everyone is lucky enough to have an estate tax problem, which is a good problem. As a practical matter, the vast majority of individuals in this geographic region are well below the net worth that Congress has deemed to be “rich” (currently $5.49 million per person).

For individuals fortunate enough to have wealth issues, there are time tested planning techniques designed to minimize the eventual “tax hit.” It is important to note that the various techniques utilized to minimize estate taxes also serve a non-tax purpose, namely to effect the orderly transfer of assets to the next generation. 

Typical non-tax considerations include: (i) funding educational expenses of children and grandchildren, (ii) providing for a surviving spouse; (iii) retaining sufficient resources to survive the golden years; (iv) charitable legacies; (v) ensuring that remaining assets reach and remain with intended loved ones; (vi) imposing conditions on distributions to loved ones who may not be prepared to handle assets; and (vi) protecting assets and legacies from unforeseeable claims. 

The wealthy client and the non-wealthy client have the same non-tax considerations. Accordingly, the “details” and “protections” typically built into the sophisticated documents utilized in a tax/wealth-driven estate plan are equally applicable and useful in a non-tax driven plan.
For example, an irrevocable life insurance trust (“ILIT”) commonly used by wealthy individuals to remove the value of life insurance from an estate may be used to: (i) provide resources for a surviving spouse, (ii) fund educational expenses of children and grandchildren, and (ii) impose conditions on distributions to children or grandchildren who may not be prepared to handle cash. Removal of the value of a life insurance policy from an estate is too narrow a view of the utility of an ILIT.

A family limited liability company (“FLLC”), often used by wealthy individuals to compress the value of assets, may be used to (i) consolidate and retain control over family assets; (ii) designate select individuals to manage family assets; (iii) provide creditor or asset protection; (iv) avoid ancillary (foreign) probate. 

Because these non-tax considerations are paramount in any estate plan, the techniques utilized for the wealthy client will also serve the interests of the non-wealthy client. In essence, we should take a broader view of the utilization of available techniques for non-wealthy clients, especially as the Federal exemption equivalent amount continues to rise or even disappears under the current administration. 

Theus Law Offices provides a complete range of estate planning services, including wills, trust, probate, successions, estate administration and probate litigation. If you are facing an estate planning issue and need a Louisiana wills and trusts attorney, estate lawyer or probate attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, Central Louisiana or elsewhere, let our estate planning lawyers and probate attorneys help you.