The Importance of Estate Planning During Your Financial Prime

As you enter your peak earning years, it's essential to consider how to manage and protect your assets. You've spent the younger years of your life developing your craft, working on your skills, and likely making sacrifices (think more sweat and tears less volcano). But it's important to remember: estate planning isn't just for the yacht club or "the 1%"; it's for anyone who wants to ensure their family's financial future and protect their legacy. Whether you're an eligible single, growing family, or a business owner, proper estate planning can help you reduce taxes, manage health issues, and preserve your wealth for future generations, friends, and charities. Your years of hard work are beginning to pay off as you settle into your career, make the most of your efforts, and make sure your assets are secured.

Why Estate Planning Matters

Estate planning extends far beyond simply creating a will. It can be a strategic, comprehensive process designed to manage your assets, safeguard your loved ones, and ensure that your wishes are faithfully carried out. Our managing partner, Michael Whipple, likes to remind our clients that they've likely been taking part in some sort of estate planning all their lives. “In high school, it was planning weekend plans, and as we grew up; we had to start planning meals, and figure out school and job prospects. The difference being we usually weren't writing down our plans to help hold us accountable.” Now that you're entering the time in your life where the hard work is looking to bring continual gains, it is important to look back and ensure you have the proper tools in place to ensure you or your loved ones are on sure ground when something happens.

Protecting Growing Families

Growing Families

If you have a growing family, estate planning ensures that your loved ones are financially secure, and helps you know who will be taking care of certain responsibilities (like your medical decisions) when/if the time arises. This includes designating guardians for your children, setting up trusts, and ensuring your assets are distributed according to your wishes. Specific instructions can be left along the lines of “unlocking” certain assets as predetermined statuses are met (think graduating college, or getting married). There are even uncomplicated ways to protect your hard-earned assets from children who marry any would-be “gold diggers” should this be a concern of yours. Speak with an estate planning attorney today and learn just how unique your plan can be when it comes to catering to your specific needs [Hint - 100%].

Key Elements of an Estate Plan

Wills and Trusts

A key starting point in estate planning is the creation of a will or a trust. A will specifies how your assets will be distributed after your passing, while a trust offers greater flexibility, allowing you to control both the timing and manner of asset distribution. Additionally, trusts can serve as an effective tool for minimizing tax liabilities.

Power of Attorney

A power of attorney allows you to designate someone to make financial or medical decisions on your behalf if you become unable to do so. This is especially important if you face health issues that could affect your decision-making abilities. While in your peak earning years, your available financial decisions are likely more numerous, and more impactful. Ensure there is no ‘down-time' in your financial affairs during a health crisis by selecting a set of primary and secondary choices for your financial power of attorney. For years, you've worked diligently to build your wealth, and now it's essential to ensure that your healthcare decisions are entrusted to someone you can truly rely on, especially in the event of an unforeseen medical challenge. Having witnessed numerous poor business decisions, you know how important it is to avoid placing critical choices—like your medical care—in the wrong hands. To safeguard your wishes and ensure your treatment aligns with your values, it's crucial to appoint both a medical and financial power of attorney. If you feel that different individuals are better suited to handle your finances and your health care, you can select separate people for each responsibility, giving you complete peace of mind. These documents can be made effective immediately, giving your power of attorney the ability to act on your behalf in the relevant matters right away, or upon your disability. Be aware that you never lose your agency over your power of attorney, it is always shared with the individuals you select who, typically, will be required to use that authority only once you are incapacitated (a springing POA).

Retirement Accounts

Your retirement accounts, such as 401(k)s and IRAs, are significant components of your estate. Properly designating beneficiaries and understanding the tax implications of these accounts can help preserve more of your wealth for your heirs. By working hand in hand with an accountant and estate planning attorney, you can learn the available methods to shield your assets from taxation and allow many of your accounts to pass directly to the prescribed beneficiaries.

Preserving Your Legacy

Preserved Legacy

Family Values and Traditions

Estate planning offers a unique opportunity to pass down not only assets but also cherished family values and traditions. This might involve crafting a family mission statement, organizing annual family gatherings, or establishing philanthropic goals that reflect your core beliefs. Not every document in your estate plan needs to be a formal directive; heartfelt letters capturing your thoughts and emotions at a particular moment can be just as meaningful to your legacy as any financial asset. While these personal touches can provide emotional resonance and guidance for your loved ones, they are not legally binding. Your heirs will not find themselves in court disputing the obligation to attend the annual family picnic, nor will such personal aspirations deplete estate resources through such litigation.

Education Funds

Setting up education funds, such as 529 plans, can help secure your children's or grandchildren's future. These funds grow tax-free and can be used for educational expenses, providing a lasting legacy of support. Education is a pivotal pillar of financial freedom. Our attorneys are comfortable working in tandem with a financial planner so you can rest easy knowing you've established a secured fund to finance the education of your legacy generation.

Business Succession Planning

For business owners, estate planning is essential to safeguarding the long-term success of their enterprise. You've worked hard to establish a successful business; it is vital to ensure that your business is prepared to continue on after your eventual departure. Thoughtful preparation ensures that your business can continue to thrive seamlessly, even in your absence. This may involve crafting a succession plan, establishing a trust, or even orchestrating a sale. The hit TV show Succession aptly highlights the importance of having a well-defined plan for high-net-worth corporations. Your business is your ‘Iron Throne'; ensure you have peace of mind by knowing who will inherit your legacy and that they have the proper legal guidance to keep your business flourishing.

Strategies to Reduce Taxes

The Tax Man

Gifting

One route to reduce your taxable estate is through gifting. You can give a certain amount of money or assets to your heirs each year without incurring gift taxes. This can help lower the overall value of your estate and reduce estate taxes. Individuals in Washington can gift $18,000 a year (doubled for married couples) pre-tax to whomever they wish. This can be an early strategy to begin distributing assets to your beneficiaries before your passing. The lifetime gift tax limit in 2025 for Washington is $13.99 million per person. This equates to over 750 years' worth of maxing out the gift tax to a single person and thus is likely only to come into play when larger gifts are made to numerous individuals.

Charitable Donations

You are in the midst of your hard-earned career, leave your mark by providing to those causes that align you're your family values and principles. Donating to charities not only supports causes you care about but can also provide tax benefits. Charitable donations can reduce your taxable income and lower your estate taxes. The IRS allows an unlimited estate tax deduction for donations to qualified charitable organizations. This means the value of your charitable gift is fully deductible from your estate's value.

Trusts

Certain types of trusts, such as irrevocable life insurance trusts (ILITs) or grantor retained annuity trusts (GRATs), can help reduce estate taxes. These trusts remove assets from your taxable estate and can provide income or benefits to your heirs. While your estate planning attorney can advise on the strategies needed to direct your assets where you want them, you will want to include a financial planner to assist with the specifics on the impacts to your taxes.

Asset Protection

Asset Protection

Insurance

Insurance is a vital portion of asset protection. This includes life insurance, health insurance, and disability insurance. These policies can provide financial support for your family if something happens to you and help cover medical expenses. Whether you've obtained coverage via your work or a private provider, ensure your designations are up to date on any insurance forms. Out-of-date designations may allow the asset to become taxable, ensure you secure the most for your estate by keeping your documents up to date.

Planning for Health Issues

Advance Directives

Advance directives, such as living wills or healthcare directives, outline your wishes for medical treatment if you become unable to communicate them. This ensures that your healthcare preferences are honored and can prevent family disputes by taking the toughest decisions out of their hands and placing them in a legal document. Use your estate plan to determine what care you'd like to receive, who is allowed to assist make medical decisions, and even who can receive any relevant medical information. You have the full power and legal authority to put in writing, methods to keep that nosey family member out of your hospital room.

Long-Term Care Planning

Planning for long-term care is crucial, especially as you age. This can include purchasing long-term care insurance or setting aside funds to cover future medical expenses. Proper planning can help preserve your estate and ensure you receive the care you need.

Working with Professionals

Estate Planning Attorneys

Attorney Michael Whipple

An estate planning attorney can help you navigate the complexities of the law and ensure that your documents are legally sound. We provide guidance on protecting your assets and ensuring that each asset is distributed to the heir or beneficiary it is intended for. Contingency plans are needed in the event your loved ones predecease you, or relationships change. Your attorney will work with you in creating your Will, Power of Attorney(s), Health Care Directive, Trusts, Community Property Agreements, Purchase and Sale Agreements, Business Succession Plans, etc. There have been countless times in which clients knew what they wanted to accomplish, but simply did not know the legal document needed to ensure that those wishes became legally sound - that is what we are here for!

Financial Planners

A financial planner can help you develop a comprehensive estate plan that aligns with your financial goals. They can provide advice on investments, retirement accounts, and tax strategies. The financial planner will focus on creating a big picture plan that allows you to focus on creating a strategy to steer yourself in the right direction. Unlike an attorney, the financial planner will not be executing legal documents to make any discussed estate plans legally enforceable.  

CPAs

A Certified Professional Accountant (CPA) will critically analyze numerous portions of the estate plan as they relate to taxes. This insight can be immensely impactful to the bottom line of your returns and the distributions that your heirs and beneficiaries will receive. A CPA can also ensure proper valuations are done to the assets within your inventory, which assists the attorney and financial planner in formulating effective, and fair, estate plans.

Start Your Estate Plan Today

Estate planning is essential for anyone in their high-earning years as there are likely more available assets within the estate. By taking the time to create a comprehensive estate plan, you can protect your assets, mitigate risk, minimize taxes, and ensure that your family is financially secure. Whether you're planning for retirement, managing health issues, or preserving your legacy, working with professionals can help you navigate the complexities of estate planning and achieve your goals.

Estate planning is life planning, it is not something that is established once and then forgotten about. It is essential to regularly review and update your plan to align with any changes in your life, financial situation, or personal goals. By staying proactive, you ensure that your estate plan remains effective and continues to safeguard your legacy for the future.