The Taxable Investor's Manifesto

CHAPTER TENPlan Your Estate: It Adds More Value Than Investing

One of the most important, and at times most challenging decisions that financially successful people need to make is how to share the fruits of their success with others through their estate plans. Estate planning is an essential factor in effective wealth management. If large estates don't legally work to reduce estate tax liability the result is costly, to the tune of up to 40% or more of the value of the estate. Looked at another way, legally minimizing estate tax can be worth more than 2.5 percentage points of investment return each year for 20 years.

Because estate tax laws are rules-based, not market-based, the odds of success are higher and more predictable than generating long-term investment returns of that magnitude. Done right, estate planning is the essence of asymmetry, magnitude, and probability of success. Of course, doing one successfully does not diminish the odds of doing the other.

FIGURE 10.1 CREATE VALUE AT THE INTERSECTIONS.

Insufficient planning, on the other hand, can lead to outsized tax bills, potential loss of control of businesses, family strife, inadequate guidance around philanthropic intentions, and other major issues. Negative consequences – almost always unintended – undermine finances, erode business competitiveness, tear at the fabric of families, and hurt community institutions. ...