Episode 341 – News flash: Estate planning is not for just the wealthy. Here are some ideas put forward in a recent article by renowned estate attorney Jonathan Blattmachr, especially for what he describes as “middle tier clients,” which he defines as people whose wealth does not exceed the available exemptions.

Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, we’ll discuss practical estate planning ideas for middle tier families. Middle tier families, those families with wealth falling below the estate tax exemption, are strongly encouraged to make plans for disposition of their estates.

Estate planning is often thought of as a concept exclusively for the wealthy. But that’s not true.  The wealthy may need estate tax planning but practically everyone needs estate planning. As of 2025, the federal estate tax exemption amount for 2025 is set at nearly $14 million for individuals and $28 million for married couples, well out of the range of most—in fact, almost all—individuals.[1] But some estate planning concepts apply not just to the very wealthy, but to what are called “middle tier” taxpayers.

Some of these ideas may simply be common sense for many of us. For one thing, you should have a will, and it should be updated periodically. Having a will can help clarify your wishes as to how your assets should be handled at your death. Otherwise, the decision will be left up to the state you live in. A will can also save money, help prevent family disputes and simplify everything for your loved ones during this very difficult time.

Another common idea is making use of a life insurance trust. A life insurance trust can offer many advantages, including helping protect insurance death benefits from creditors, providing greater control over how and when your beneficiaries receive the funds, and in some cases, saving state estate or inheritance taxes. Yes, several states have their own state estate or inheritance tax systems with significantly lower exemption amounts.

But there’s more. In a recent article for the NAEPC Journal of Estate & Tax Planning, renowned estate attorney Jonathan G. Blattmachr, Esq., made some suggestions for what he refers to as “middle tier clients,” in other words, people with some significant assets, but whose wealth does not exceed the available exemptions. Here are a few of his ideas:[2]

Avoiding “Ruinous” Lifestyles. No shock here. If you become addicted to drugs or alcohol, it could easily ruin your emotional, physical and financial health. Extravagant spending over a long period of time is also likely to be ruinous.

Protecting Your Lifestyle for You and Your Family. As Blattmachr points out, inflation can be a lifestyle-killer. He suggests that in order to maintain your spending power, your investments need to grow at an after-tax rate that is higher than the inflation rate. This concept still applies after you’re gone.

Getting Descendants to Enter Prenuptial Agreements. As Blattmachr points out, divorce is one of the most common ways that an unanticipated large claim against someone’s assets might happen. A prenuptial agreement is often considered good financial planning. Blattmachr goes so far as to suggest that the older generation make it a requirement that, in order to receive benefits from the family, the younger generation must enter into a prenuptial or postnuptial agreement that protects against claims that come from a divorce. He also recommends that an independent fiduciary determine if the agreement provides adequate protection.

Closely Examining 401(k)s, Qualified Plans and IRAs. Many “middle-tier” taxpayers have a significant amount of money in a 401(k), qualified plan or IRA. Virtually all distributions from these plans are subject to ordinary income tax, and the same applies to post-death distributions due to what’s known as “income in respect of a decedent” or IRD.[3]

Planning for these types of assets, whether during your lifetime or as part of your estate, is among the most difficult financial challenges you might face. A Roth IRA or 401(k) can help.

Estate Building Through the Use of Life Insurance. Life Insurance is simply an excellent tool to build your estate and create a legacy for your heirs. It can help provide financial support to your beneficiaries after your death, helping them to maintain their lifestyle and cover some of their expenses.

Protecting Wealth Building Potential: Disability income insurance is vital to protect the primary source of your ability to create wealth and that is the income you earn from working. An individual who is disabled, simply can’t continue building wealth and savings, unless their income capacity is protected with disability insurance.

Making Use of the Gift Tax Annual Exclusion. This year’s annual gift tax exclusion amount is $19,000 per individual.[4] Through the use of “gift-splitting,” that is, making a combined gift with your spouse, the limit is doubled to $38,000, and that amount is per recipient. For example, if you have three children, you can make a $38,000 gift to each child, for a total combined gift of $114,000. If you go above the limit, it will reduce your federal estate and gift tax exemption amount.

Limiting Your Potential Liability With a Business Entity. We discussed some of this during episode 334. The use of a limited partnership, corporation, limited liability company or other entity to hold some of your business or investment assets can provide asset protection and tax benefits to you and your family.

This is just the beginning. There are many other ideas that could potentially come into play. It’s safe to say that this is a complicated subject, and it’s best not to try and do it on your own. You may need assistance, whether you’re part of the so-called “middle tier” or not!

Your Security Mutual Life insurance agent can help. He or she will assemble your team and coordinate with your attorney and tax professional to review your situation and to determine the strategy and products that will best suit your needs and objectives.

[1] Schubel, Kate. “The 2025 Estate Tax Exemption.” Kiplinger.com. https://www.kiplinger.com/taxes/whats-the-new-estate-tax-exemption (accessed May 29, 2025).

[2] Blattmachr, Jonathan G. “Some Reasonable Estate Planning Steps for the Middle Tier Family.” Naepcjournal.org. https://www.naepcjournal.org/issue/46/some-reasonable-estate-planning-steps-for-middle-tier-family/ (accessed May 29, 2025).

[3] Id.

[4] Fidelity Wealth Management. “Lifetime estate gift tax & annual gift exclusions.” Fidelity.com. https://www.fidelity.com/viewpoints/wealth-management/insights/lifetime-gift-and-estate-tax-exclusions (accessed May 30, 2025).

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. 

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve at legal, tax or other financial advice related to individual situations, because each person’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and X (formally Twitter). Thanks for listening, and we’ll talk to you next time.

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