Estate Planning Tools for Wealthy Investors

When you’re actively working toward building wealth, it’s a good idea to make sure you’re taking steps to protect it. Taking the time to develop an estate plan is a must for wealthy investors, and the sooner you get started, the better. If you don’t have an estate plan in place yet, you can take a look at some important tools that you can use to safeguard your nest egg. A financial advisor can also help you determine what you might want to account for in your estate plan.

1. A Last Will and Testament

A will is the most basic element of any estate plan, and it’s particularly important when you have a large estate or minor children. Besides allowing you to spell out the exact distribution of your assets to your heirs, a will gives you the power to name an executor and specify guardians for your children. A will is also subject to the probate process. So if you have assets that you want to exclude from probate, consider using a trust.

2. A Trust

While building a nest egg is important, it's just as important to protect it. That's where an estate plan comes in.

A trust is a legal entity that allows you to transfer control of certain assets to a trustee. You can act as your own trustee during your lifetime, and name someone else to succeed you after your death.

The trustee’s job is to ensure that the assets in the trust are managed according to your specific wishes. For example, you can spell out the terms under which your children can inherit their share of your estate or arrange for charitable donations to be made from your estate.

A trust can take effect during your lifetime or upon your death. You also have a choice between a revocable trust and an irrevocable trust. The former allows for assets to be transferred in and out. But property transfers with an irrevocable trust are permanent. The type of trust you’ll need will depend on how large your estate is, how many beneficiaries you have and what you want done with your assets after you’re gone.

3. Beneficiary Designation

If you have money invested in a 401(k), IRA or another account, it’s important to be very clear on who you want the beneficiary to be. Generally, when you open these kinds of accounts, you’re asked to designate someone as your beneficiary. But if you haven’t chosen one yet, consider adding that to your to-do list.

When you die without listing beneficiaries, your heirs have to wait out the probate process before collecting whatever you’ve left them. At that point, the money would be distributed according to your state’s inheritance laws. Making sure you have the appropriate beneficiary designation forms on file for each of your investment accounts can eliminate any problems or delays down the line.

4. Long-Term Care Insurance

Medical expenses can quickly deplete your hard-earned savings, particularly as you age and may require specialized care. Investing in long-term care insurance can serve as a strategic way to mitigate these financial risks. This type of insurance is specifically designed to provide a daily benefit to cover eldercare expenses, such as assistance with daily living activities, home health services, or stays in assisted living facilities and nursing homes.

One of the key advantages of long-term care insurance is that it helps protect your assets. Without it, you may find yourself needing to spend down your savings to qualify for Medicaid, which often comes with limited options for care providers and services. By purchasing a long-term care policy, you maintain greater control over the quality and type of care you receive, ensuring your comfort and dignity in later years.

Securing a policy earlier in life can also be a proactive step toward safeguarding your investment returns. It provides peace of mind, knowing you’re protecting both your financial future and your loved ones from potential caregiving burdens.

As with any financial decision, it’s important to assess your individual needs, compare policy options and factor in costs. Consulting with a financial advisor or insurance specialist can help ensure you choose a plan tailored to your goals and circumstances.

5. Life Insurance

You might assume that if you’ve accumulated significant wealth, life insurance isn’t a necessary part of your financial strategy. However, even with a sizable asset base, life insurance can play a critical role in protecting your legacy and ensuring your loved ones are financially secure after you’re gone.

For instance, life insurance can be used to address a variety of financial responsibilities. It can provide the funds needed to settle any outstanding debts owed by your estate, including mortgages, personal loans or credit card balances. Additionally, it can help cover the often-overlooked costs associated with funeral and burial arrangements, which can quickly add up and create a financial burden for your family during an already difficult time. Beyond immediate expenses, life insurance can also serve as a tool to fund future goals, such as paying for your children’s or grandchildren’s college education or providing a financial cushion for your spouse or other dependents.

By determining how much life insurance coverage is appropriate for your situation and purchasing the right policy, you’re effectively creating a dedicated fund for your heirs. This ensures that they have the financial resources needed to settle your estate, pay applicable taxes and manage other obligations without having to liquidate valuable assets or disrupt long-term investment plans.

Bottom Line

A mother and daughter, content in the estate plan they've put together outlining the mother's wishes.

Mapping out your estate plan is an important part of building and preserving wealth for the long term. Taking an in-depth look at the five tools we’ve outlined here is a good starting point if you’re not sure where to begin.

Estate Planning Tips

You might also consider turning to a professional for guidance. Many financial advisors offer estate planning services to ensure you leave the legacy you want. SmartAsset’s financial advisor matching tool makes it easier to find an advisor who meets your needs. First you’ll respond to a short questionnaire about your financial situation and goals. Then we’ll match you with financial advisors in your area. This allows you to find a good fit while the program does much of the hard work for you.