By James L. Cunningham Jr., Esq.
You’ve worked hard to build your wealth. Maybe you’ve built a successful business. Maybe you’ve invested wisely, accumulated real estate, or spent decades saving for your family. Whatever path brought you here, you’ve reached the point where a basic estate plan is no longer enough.
This is where many families get stuck. They know they need a plan, but the strategies sound complicated, the tax laws keep changing, and it’s hard to know who to trust. The reality is this: this is not easy stuff.
High net worth estate planning requires an experienced team of professionals who understand how taxes, trusts, business interests, and asset protection all work together.
The good news is that there are proven strategies that wealthy families have used for years. In this guide, we’ll walk through five of the most effective ways to reduce taxes, protect assets, and transfer wealth to future generations. Whether you’re planning for your children, protecting a family business, or preserving a lifetime of work, understanding these strategies is the first step toward putting the right A-Team together.
Need help planning your high net worth estate? CunninghamLegal provides expert help from offices across California. Contact us today.
What Is High Net Worth Estate Planning?
Simply put, high net worth estate planning is the use of advanced legal and tax strategies to protect your wealth, reduce unnecessary taxes, and make sure your assets pass to the people you choose. Once your wealth reaches a certain level, a basic will or living trust is often no longer enough.
There is no magic number that makes someone “high net worth.” While the current federal estate tax exemption is $15 million per person, that is only the point where the federal estate tax begins. In our experience, estate planning for high-net-worth individuals often becomes important once a family has $2.5 million or more in combined assets.
That can include your home, rental property, retirement accounts, business interests, investment portfolios, and life insurance. At that level, high net worth estate planning is about much more than taxes. It is also about asset protection, protecting your family from creditors, planning around California laws like Prop 19, and reducing the impact of California’s high state income taxes.
One thing we’ve learned over the years is that “permanent” in tax law usually means “until Congress changes it.” Tax laws come and go, and more than a dozen states still impose their own estate taxes. That’s why good planning isn’t built around today’s tax rules alone. It’s built to protect your family, preserve your wealth, and give future generations the flexibility to adapt no matter what changes come next.
Estate Planning Strategies for High Net Worth Families:
Irrevocable Trusts
Irrevocable trusts are the foundation of estate planning for high-net-worth individuals. But not all trusts are created equally. The right trust can protect your wealth and reduce taxes. The wrong one can create expensive problems. That’s why understanding good trusts vs. bad trusts is also important.
Intentionally Defective Grantor Trusts (IDGTs)
Don’t let the name scare you. An Intentionally Defective Grantor Trust (IDGT) is simply an irrevocable trust that lets you move wealth to your family while giving it a chance to grow faster.
Here’s how it works: you transfer assets, such as a stock portfolio, rental property, or business interest, into the trust. The gift is complete, so those assets are no longer part of your taxable estate.
But here’s the interesting part: you still pay the income taxes on the trust’s earnings. That may sound backwards, but it’s actually one of the biggest advantages. Because the trust isn’t paying those taxes, more money stays in the Trust and continues growing for your beneficiaries. Paying someone else’s tax bill is also known as “tax burn” because it reduces the taxable value of your estate at death instead of depleting the value of what you have already gifted (the assets of the IDGT).
Even better, the taxes you pay are not treated as additional gifts. In other words, you’re able to move even more wealth to your family without using more of your gift tax exemption. It’s one of those strategies that sounds odd at first, but makes a lot of sense once you see how it works.
Dynasty Trusts (Generation-Skipping Trusts)
A Dynasty Trust is one of the most powerful ways to transfer wealth to your family. Instead of leaving assets directly to your children, you leave them in a Trust that benefits your children during their lifetimes and then continues for your grandchildren. The result is simple: when your child passes away, the trust assets generally are not included in your child’s taxable estate. A Dynasty Trust created during your lifetime can also be an IDGT.
Today’s generation-skipping transfer (GST) tax exemption is $15 million per person under the One Big Beautiful Bill Act. If those assets are placed in a properly structured Dynasty Trust, they can continue growing for decades. A $15 million trust could eventually be worth $30 million, $50 million, or more, and those future gains can still avoid estate tax as the trust passes from one generation to the next.
Because these Trusts are designed to last for decades, choosing the right trustee is critical. Understanding your trustee’s role and trustee responsibilities can help keep the trust on track for generations. Dynasty Trusts can also be combined with SLATs and other advanced planning strategies to create even greater flexibility for your family.
Spousal Lifetime Access Trusts (SLATs)
A Spousal Lifetime Access Trust, or SLAT, is a way for one spouse to move assets out of their taxable estate without feeling like they’ve given everything away. For example, Dad creates an irrevocable trust (a SLAT) for Mom.
The assets are no longer part of Dad’s estate, but Mom can still receive distributions from the Trust if the family needs access to the money. It can be a great way to reduce future estate taxes while keeping a financial safety net.
Here’s the catch. Some couples think, “I’ll create one for you, and you create one for me.” Not so fast. If both spouses create identical SLATs at the same time, the IRS may ignore both trusts under what’s called the “reciprocal trust doctrine”. The solution is careful planning. The trusts should have different terms, different assets, and be created at different times.
SLATs are especially popular in California because, when structured properly, they can also help preserve valuable Prop 13 property tax benefits on qualifying real estate.
Irrevocable Life Insurance Trusts (ILITs)
Many people are surprised to learn that if you own your life insurance policy, the death benefit is generally included in your taxable estate. An Irrevocable Life Insurance Trust (ILIT) is designed to change that. Instead of you owning the policy, the Trust owns it.
Each year, you give money to the trust, and the trustee uses those funds to pay the life insurance premiums. Because the Trust (not you) owns the policy, the insurance proceeds are paid to the trust when you pass away instead of becoming part of your taxable estate. The trust then distributes the money according to its terms, allowing your beneficiaries to receive the proceeds free of income tax (and, when properly structured, free of estate tax as well).
For many years, ILITs became less common because the federal estate tax exemption was so high. Today, more families are taking another look at them. While the exemption is currently permanent under today’s law, tax laws can change. An ILIT can provide valuable flexibility while helping preserve more of your wealth for your family.
Grantor Retained Annuity Trusts (GRATs)
A Grantor Retained Annuity Trust, or GRAT, is a way to move future growth to your family with little or no gift tax. Here is the simple version. You put an asset into the trust, such as stock, a business interest, or another asset you expect to grow. The trust pays you back over time through annuity payments. If the asset grows more than the IRS expected rate, that extra growth can pass to your beneficiaries tax-free.
This can be very powerful when interest rates are favorable or when you own something that may increase sharply in value. Think about a pre-sale business interest, fast-growing stock, or real estate with strong upside. Some families use “rolling GRATs,” which means they set up a series of GRATs over time instead of putting everything into one trust.
Like most advanced planning, the idea is simple. The execution is not. Done correctly, a GRAT can shift future appreciation out of your estate. Done casually, it can become one more expensive lesson in why tax law is not a hobby.
Lifetime Gifting: Estate Planning Strategies for Ultra-High Net Worth Tax Exposure
Every dollar you give away during your lifetime is one less dollar in your taxable estate. For many families, lifetime gifting is one of the simplest and most effective ways to reduce future estate taxes.
In 2026, you can give up to $19,000 per person, per year without filing a gift tax return. If you give more than that to one person, you may need to file IRS Form 709, but that doesn’t necessarily mean you’ll owe tax. Those larger gifts simply count against your $15 million lifetime gift and estate tax exemption. Many families use these annual gifts to help children or grandchildren while gradually reducing the size of their estate.
If you’re giving money to a minor, a Trust is often a better choice than writing a check. A trust can protect the gift from creditors and keep the money under the control of a trustee until the child reaches an age you choose.
By comparison, the Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act UGMA are custodial accounts that allow you to give money or investments to a child while an adult manages the account. The downside is that once the child reaches the age of majority, typically between 18 and 25 depending on state law, the money legally belongs to them. They can spend it however they want, whether you agree with the decision or not. A Trust is often a better choice than a UTMA or UGMA account because of the control it provides.
If you’re transferring California real estate, you also need to understand Prop 19. In most cases, a parent-to-child transfer now triggers a property tax reassessment unless the child qualifies for the limited primary residence exclusion.
Gifting sounds simple, but the rules are not. Form 709 filing requirements, completed-gift rules, and the interaction with Prop 19 can create expensive mistakes. Before making significant gifts, make sure your attorney, CPA, and financial advisor are all working from the same playbook.
Gifts in Entity Wrappers: Family Limited Partnerships and LLCs
Sometimes it’s better to give away part of a business or investment than the asset itself. A Family Limited Partnership (FLP) or Limited Liability Company (LLC) can help you move wealth to the next generation while reducing the value of the taxable gift.
Here’s the basic idea. Let’s say you own $18 million in real estate. Instead of giving the property directly to your children, you place it into an FLP or LLC and give them ownership interests in the entity. Because your children can’t control the property, sell their shares, or borrow against them, those interests are worth less than owning the real estate outright.
That reduced value, called a valuation discount, often ranges from 15% to 35%. In this example, an $18 million property with a 35% discount may be treated as a taxable gift of only about $11.7 million.
The best part is that you can still stay in control. As the general partner or manager, you continue making the decisions about the property. Your children receive the economic benefits of ownership, but they don’t get to manage or sell the assets. For many families, it’s a smart way to transfer wealth without giving up control.
Ultra High Net Worth Estate Planning: Charitable Giving Strategies
If charitable giving is already part of your plan, you may be able to help your favorite causes while reducing taxes at the same time. The right strategy can benefit both your family and the charities you care about.
- Charitable Remainder Trusts (CRTs): If you own highly appreciated stock, real estate, or another valuable asset, a Charitable Remainder Trust (CRT)can be a powerful planning tool. You transfer the asset into the trust, receive income from it for a period of time or for life, and whatever is left goes to charity. Charitable remainder trusts can also provide an immediate income tax deduction.
- Donor-Advised Funds (DAFs): Think of a Donor Advised Fund as a charitable savings account. You make one contribution, receive the tax deduction right away, and then decide which charities receive grants over time. It’s simple, flexible, and much easier to manage than a private foundation.
- Private Foundations: If your family wants to create a lasting charitable legacy, a private foundation gives you the most control. You decide how the money is invested and distributed, and future generations can help manage the foundation. The tradeoff is more paperwork, higher costs, and additional rules.
Roth IRA Conversions and Retirement Account Planning for Ultra High Net Worth Estate Planning
For many wealthy families, a traditional IRA or 401(k) can become one of the least tax-efficient assets to pass on. The money hasn’t been taxed yet, so when it eventually comes out, your family may face income taxes. If your estate is large enough, those same assets may also increase your estate tax bill.
A Roth conversion takes a different approach. You choose to pay the income tax now and move the money into a Roth IRA. From that point on, the account grows tax-free, there are no required minimum distributions (RMDs) during your lifetime, and your beneficiaries can generally receive the money income tax-free. For estate planning for high net worth families, paying some tax today can often save much more tomorrow.
Families with very large retirement accounts may also use what’s called a “strip-out” strategy. Instead of waiting until RMDs force large withdrawals, you gradually move money out over several years to better manage your tax bill. In some cases, the money used to pay those taxes can be offset by combining the strategy with an Irrevocable Life Insurance Trust (ILIT), helping preserve even more wealth for the next generation.
Take the Next Step with Estate Planning for High-Net-Worth Individuals
The rules may have changed, but the need to plan hasn’t. Today’s tax laws may be more favorable than many families expected, but history has taught us one thing: tax laws change. The goal of high net worth estate planning isn’t just to save taxes. It’s to protect your family, preserve your wealth, and make sure your assets end up where you want them to go.
One thing we’ve learned over the years is that this is not easy stuff. These strategies don’t work in a vacuum. Your Trusts affect your taxes. Your taxes affect your investments. Your business affects your estate plan. That’s why this is not a one-professional job.
It takes an experienced estate planning attorney working together with your CPA, financial advisor, and other trusted advisors. At CunninghamLegal, that’s what we call your A-Team. We coordinate every part of your California estate planning strategy so everyone is working toward the same goal.
Whether you’re updating an existing plan or starting from scratch, don’t wait until a tax law changes or a family event forces your hand. The best planning happens before there’s a problem to solve. If you’re ready to help protect what you’ve built, schedule a call with CunninghamLegal and let’s start putting your A-Team together.
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