Financial Planning

4 Common Tax and Estate Planning Mistakes of the Wealthy

Couple going over information with coffee and tablet for “4 Common Tax and Estate Planning Mistakes

Although affluent individuals and families obviously get a lot of things right when it comes to accumulating and managing wealth, they’re not immune to making mistakes. This is especially true when it comes to tax and estate planning, given the increased complexity that comes with significant wealth.

If you’re like most parents, you want to leave as large a legacy as possible for your heirs. But there is no shortage of tax, probate and inheritance traps that could pose a challenge. The following are four key mistakes you’ll want to avoid in order to keep as much wealth as possible in your family:

Gifting highly appreciated assets 

While it’s understandable to want to see your children and heirs enjoying the fruits of the wealth you’ve amassed, don’t make the mistake of re-titling highly appreciated assets in their name as a way to transfer wealth. Why? Because when you gift a highly appreciated asset like real estate or stocks, the recipient receives the gift at its original cost basis (i.e., the original purchase price, adjusted for stock splits, dividends and return of capital distributions). If the asset was inherited, however, the beneficiary is afforded a “step-up” in the cost basis to the value of the asset at the time of the original owner’s death.

Therefore, the gift of a property that was purchased for $100,000 and now worth $500,000 would subject the recipient to capital gains taxes on $400,000 if they sold it right away. But if the exact same property was inherited and immediately sold, the beneficiary would pay no capital gains. The difference can be tremendous.

Hiding illiquid valuables 

For many successful families, a great deal of their wealth may be tied up in expensive personal valuables (e.g., artwork, antiques and jewelry). Often, parents will purposefully avoid including these items in their Will based on an unwritten understanding that those items will find their way into the homes of their children outside of the probate process and without reporting the transfer for tax purposes. If one or more of your children are named as executors or co-executors of your estate, however, by circumnavigating proper reporting you are essentially asking them to run afoul of probate and tax laws.

Treating personal and legacy assets similarly 

There’s a tremendous difference between having $2 million with the hope of leaving a meaningful inheritance, and having $10+ million with the certainty of transferring a sizable legacy. In the first instance, gradually reducing overall portfolio risk as you approach and then enter retirement makes perfect sense. But for larger estates, you are essentially managing two separate asset pools: one for your personal use throughout retirement and a second that will be transitioned to your beneficiaries. Since that second pool of assets won’t be needed for income, you can afford to maintain a higher return/higher risk profile with those investments, even as you reduce the risk associated with your personal-use assets.

Not coordinating the efforts of your advisors 

No matter how experienced, savvy and reliable your trusted advisors are, none of them will be as successful in isolation as all of them will be when working in an integrated, cohesive manner with open lines of communication. Your tax accountant and financial advisor should be talking about which investments to sell for tax loss harvesting purposes. Your attorney and financial advisor should be working together to ensure your estate plan addresses your needs and is efficiently implemented. Collaboration is the key to avoiding critical wealth, estate and tax planning mistakes down the road.

In order to avoid these and other errors that can cost you both time and money, take time to talk with your SunTrust advisor about both your short-term and long-term goals, including your estate planning and legacy objectives.

For more on financial planning: 

Call our Client Advisory Center at 844.206.8900 or learn more online.

Note: Center hours are 8-6 ET, Monday through Friday

SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its affiliates (collectively, "SunTrust") are not permitted to give legal or tax advice. While SunTrust can assist clients in the areas of estate and financial planning, only an attorney can draft legal documents, provide legal services and give legal advice. Clients of SunTrust should consult with their legal and tax advisors prior to entering into any financial transaction or estate plan.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


Investment and Insurance Products:

Are Not FDIC or any other Government Agency Insured   Are Not Bank Guaranteed  May Lose Value 

© 2018 SunTrust Banks, Inc

equal housing logoSunTrust Bank is an Equal Housing Lender. Member FDIC

equal housing logoEqual Housing Lender. SunTrust Mortgage, Inc

SunTrust, SunTrust Mortgage, SunTrust PortfolioView, SunTrust Robinson Humphrey, SunTrust Premier Program, AMC Pinnacle, AMC Premier, Access 3, Signature Advantage Brokerage, Custom Choice Loan and SunTrust SummitView are federally registered service marks of SunTrust Banks, Inc. All other trademarks are the property of their respective owners.

Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company and SunTrust Banks Trust Company (Cayman) Limited. Securities, brokerage accounts and insurance (including annuities) are offered by SunTrust Investment Services, Inc., a SEC registered broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services, Inc., a SEC registered adviser. GFO Advisory Services, LLC is a SEC registered investment adviser that provides investment advisory services to a group of private investment funds and other non-investment advisory services to affiliates. Mortgage products and services are provided by SunTrust Mortgage, Inc.

SunTrust Mortgage, Inc. - NMLS #2915, 901 Semmes Avenue, Richmond, VA 23224, 1-800-634-7928. CA: licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, IL: Illinois Residential Mortgage Licensee #MB-989, Department of Financial and Professional Regulation, 100 W. Randolph, Suite 900, Chicago, IL 60601, 1-888-473-4858, MA: Mortgage Lender license #-ML-2915, NJ: Mortgage Banker License - New Jersey Department of Banking and Insurance, NY: Licensed Mortgage Banker—NYS Department of Financial Services, and RI: Rhode Island Licensed Lender.

"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of SunTrust Banks, Inc.: SunTrust Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.

SunTrust Private Wealth Management, International Wealth Management, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups and GenSpring are marketing names used by SunTrust Bank, SunTrust Banks Trust Company (Cayman) Limited, SunTrust Delaware Trust Company, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.

SunTrust Bank and its affiliates do not accept fiduciary responsibility for all banking and investment account types offered. Please consult with your SunTrust representative to determine whether SunTrust and its affiliates have agreed to accept fiduciary responsibility for your account(s) and if you have completed the documentation necessary to establish a fiduciary relationship with SunTrust Bank or an affiliate. Additional information regarding account types and important disclosures may be found at

SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.