For individuals with a $5 million portfolio, estate planning is one of the most consequential financial decisions you'll make — and one of the most frequently delayed. The federal estate tax exemption is set to drop significantly in 2026, making proactive planning urgent for high-net-worth families. At One Bridge Wealth Management in Clayton, Missouri, our advisors help St. Louis families with $2M–$10M in assets coordinate trust strategies, Roth conversions, charitable giving, and beneficiary planning to protect and transfer wealth efficiently.
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When it comes to estate planning, the goal isn’t to take it with you—that’s what Egyptian pharaohs tried. With a $5 million portfolio, your focus should be on ensuring your hard-earned wealth is protected, efficiently passed to loved ones, and aligned with your legacy goals. In this post, we’ll break down the most important strategies to make sure Uncle Sam doesn’t get more than his fair share and that your wealth works as hard for your family as you did earning it.
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Here are the main considerations:
1. Estate Tax Mitigation
- Federal Estate Tax: The federal estate tax exemption for 2025 is $13.99 million per individual, but this exemption is set to sunset in 2026, reverting to approximately $6 million (adjusted for inflation). For couples, this would reduce the combined exemption, increasing the potential for estate tax liability.
- State Estate Taxes: Certain states impose estate or inheritance taxes with lower exemption thresholds. Individuals should consider their state's specific rules.
2. Wealth Transfer Strategies
- Gifting: Using the annual gift tax exclusion (currently $19,000 per recipient in 2025) to transfer wealth during life can reduce the taxable estate.
- Trusts: Irrevocable trusts, such as Grantor Retained Annuity Trusts (GRATs) or Spousal Lifetime Access Trusts (SLATs), can help remove assets from the taxable estate while retaining some control or income benefits.
- 529 Plans: Contributions to 529 plans for children or grandchildren can be an efficient way to transfer wealth for educational purposes while taking advantage of gift tax exclusions. Some states, such as Missouri, offer a state tax deduction on contributions.
3. Asset Protection
- Protecting assets from creditors, lawsuits, or divorce is essential for high-net-worth individuals. Asset protection trusts and liability insurance are common tools.
- Business owners should consider corporate structures that limit liability and protect personal assets.
4. Efficient Wealth Distribution
- Beneficiary Designations: Ensuring proper designations on retirement accounts, insurance policies, and payable-on-death (POD) accounts to avoid probate.
- Charitable Giving: Using donor-advised funds or charitable remainder trusts (CRTs) to reduce the taxable estate while supporting causes important to the individual.
- Equalizing Inheritances: Balancing bequests to heirs, especially in cases where illiquid assets like real estate or business interests are involved.
5. Income Tax Implications
- Capital Gains Tax: Proper planning for low-basis assets can minimize tax liability for heirs. The step-up in basis at death can be a significant benefit.
- Roth Conversions: Converting traditional IRAs to Roth IRAs during life can reduce required minimum distributions (RMDs) and provide tax-free growth for heirs.
6. Health and Long-Term Care Planning
- With longer lifespans, allocating resources for healthcare, assisted living, or long-term care insurance is a vital part of estate planning.
- Planning for incapacity through durable powers of attorney and healthcare directives ensures wishes are followed and reduces stress on family members.
7. Succession Planning for Businesses
- For business owners, creating a succession plan that outlines how the business will be managed or transferred is critical. This might involve buy-sell agreements or transferring shares to a trust or heirs.
8. Minimizing Probate and Administration Costs
- Using trusts, joint ownership structures, and other tools can help avoid the delays, costs, and public nature of probate.
9. Family Dynamics and Communication
- Open communication with family members about the estate plan can prevent misunderstandings and disputes.
- Creating a "legacy letter" to share personal values, intentions, and family history can enhance the non-financial aspects of estate planning.
10. Regular Review and Updates
- Life events (marriage, divorce, births, deaths) and legislative changes can impact the effectiveness of an estate plan. Regular reviews ensure the plan remains aligned with goals and the law.
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Let me know if you'd like to explore specific strategies for any of these areas!
The fees, expenses, and features of 529 plans can vary from state to state. By investing in a plan outside your state of residence, you may lose any state tax benefits.