In today's world, where social media and celebrity culture often glorify wealth and material possessions, it's easy for people to mistake the accumulation of wealth as an end in itself. However, truly intelligent and financially savvy individuals understand that wealth is not just about having it, but about growing it and passing it on to future generations. In this article, we will explore three strategies that certified financial planners use with their high-income clients to ensure their wealth is passed on according to their wishes.
Make Strategic Gifts
One of the simplest ways to transfer wealth is by giving cash or other assets to family members every year. However, it's important to be mindful of the annual gift tax exclusion, which is $19,000 per recipient in 2025. The annual exclusion can be a great method of transferring wealth tax-free because the limit applies from one person to another person. For example, a wealthy married couple could give $19,000 each to their daughter and her partner, totaling $76,000 altogether. If they have multiple children, they can continue to gift up to the exclusion limit for each recipient.
Fund a College Savings Account
Education is a worthy investment that deepens the mind while expanding job opportunities and earning potential. It's also a smart and fairly common wealth-transfer tool, particularly through funding a 529 college savings plan. Most states provide a state-level tax deduction up to a certain amount for funds transferred to a 529. The assets can grow tax-free in the account, and as long as they're withdrawn to cover certain educational expenses, they're tax-free as well. Using a tax-advantaged strategy to ease the financial burden of college costs can have a lasting impact, especially in terms of reducing the amount of student loans a young person may have to take out, allowing them to graduate with less debt and greater financial freedom.
Create a Family Limited Partnership
While the previous strategies are relatively simple and easy to implement for most high-income families looking to save on taxes and transfer assets, there's another more complex approach that could be beneficial for families with significantly higher net worth. Very high-income individuals may consider using a family limited partnership (FLP) to tax-efficiently transfer assets such as businesses, large real estate holdings, or other high-value assets that could put their net worth above the current estate tax exemption—roughly $14 million per individual or $28 million per married couple. This can get complicated quickly but you're basically trying to transfer ownership interests in the partnership
