High Net Worth Retirement Planning: Wealth Preservation Strategies

Estate tax exemptions are historically high but scheduled to decrease - plan accordingly:

• **Use it or lose it:** Exemptions scheduled to drop 50% in 2026
• **Spousal portability:** Surviving spouse can use deceased spouse's unused exemption
• **Irrevocable Life Insurance Trust (ILIT):** Removes life insurance from estate
• **Grantor Retained Annuity Trust (GRAT):** Transfer growth to heirs tax-free
• **Qualified Personal Residence Trust (QPRT):** Gift home at reduced value
• **Family Limited Partnership:** Valuation discounts for transferred assets
• **Annual gifting:** $18,000 per recipient (2024) removes assets from estate

High-net-worth retirees need assets in multiple tax buckets for flexibility:

• **Roth conversions:** Convert traditional IRA to Roth during low-income years
• **Tax bracket management:** Fill lower brackets each year with conversions
• **Qualified Longevity Annuity Contract (QLAC):** Defer RMDs on up to $200,000
• **Municipal bonds:** Tax-free income for high-bracket retirees
• **1031 exchanges:** Defer capital gains on real estate indefinitely
• **Harvest capital losses:** Offset gains in taxable accounts

1. 1**Ages 60-72:** Aggressive Roth conversions before RMDs and Social Security
2. 2**Age 73+:** Coordinate RMDs, Social Security, and withdrawals to minimize taxes
3. 3**High-spending years:** Draw from taxable accounts to preserve Roth
4. 4**Low-spending years:** Roth conversions and tax-gain harvesting

Protecting wealth from creditors, lawsuits, and predators is essential:

• **Domestic Asset Protection Trusts (DAPT):** 19 states allow self-settled protection trusts
• **Offshore Asset Protection Trusts:** Stronger protection but more complex
• **LLC for rental properties:** Shield personal assets from tenant lawsuits
• **Umbrella insurance:** $5-10 million coverage for liability protection
• **Retirement accounts:** ERISA plans have unlimited federal creditor protection
• **Tenancy by entirety:** In some states, protects jointly-owned assets from individual creditors
• **Prenuptial agreements:** Protect premarital wealth in second marriages
• **Family Limited Partnership:** Creditor protection plus estate tax benefits

High-net-worth investors should consider alternatives to reduce stock/bond correlation:

• **Gold IRA:** Hold physical precious metals in tax-advantaged account
• **Self-Directed IRA:** Invest in real estate, notes, private equity
• **Oil & gas partnerships:** Tax deductions plus income potential
• **Private placements:** Accredited investor access to pre-IPO companies
• **Master Limited Partnerships (MLPs):** Energy infrastructure income
• **Collectibles:** Art, wine, classic cars (not IRA-eligible)

High-income retirees pay surcharges on Medicare premiums based on MAGI:

• **Two-year lookback:** 2024 premiums based on 2022 tax return
• **Roth withdrawals don't count:** Tax-free income doesn't increase MAGI
• **Life-changing event exception:** Job loss, marriage, divorce can reset brackets
• **Bracket cliffs:** Earning $1 over threshold costs thousands in premiums
• **Coordinate withdrawals:** Plan traditional IRA withdrawals to stay under thresholds

Philanthropy can reduce taxes while supporting causes you care about:

• **Qualified Charitable Distributions (QCD):** Give up to $105,000 from IRA directly to charity
• **QCDs satisfy RMDs:** Donate RMD without increasing taxable income
• **Donor-Advised Funds (DAF):** Front-load charitable deductions in high-income years
• **Charitable Remainder Trusts (CRT):** Income for life, remainder to charity
• **Charitable Lead Trusts (CLT):** Income to charity now, assets to heirs later
• **Gifting appreciated stock:** Avoid capital gains, get full market value deduction
• **Bunching donations:** Alternate years of itemizing vs standard deduction