Many consumers, seeing the term “wealth transfer plan”, move right along-thinking of the bills due today, perhaps, and not worried about the future. Perhaps you have a will in place, and think you’re covered-or, like many, perhaps you’re planning on writing a will but haven’t gotten around to it yet.
Here’s something to consider: every family can benefit from a solid wealth transfer plan, regardless of your bank account. And without exception every family will benefit from a well-drawn up will. In fact, a will is one of the three main backbones of a solid wealth transfer plan; you’ll also want to include a power of attorney, and a revocable trust.
First and foremost, if you do not have a will, the bulk of your estate may be lost to legal fees and taxes. An estate doesn’t have to mean millions of dollars; even a modest savings account and some simple investments, such as a 401(k) plan, a pension, a mutual fund or two can be an estate-and their proceeds can be the difference between leaving a child with “something” versus those monies going to the government, leaving a child with burial expenses (that can exceed $10,000).
A will helps to allocate any investments you have and can help to provide guardianship for minors-though on its own, it is not complete. Certain assets, such as retirement assets, only transfer according to beneficiary designations. A will is an excellent and very necessary first step for a wealth transfer plan. It is, though, only a first step.
You’ll want to consider a power of attorney, as well-a trusted individual who can make decisions for property, health, or disability issues. Choosing the right person is key; in some cases, you may have one power of attorney chosen for health issues, another for property. Making this decision and trusting the right person means that in the event of your incapacity, you (and your estate) will still be taken care of.
The third element to consider is a trust-again, not just for the “very wealthy”. Set up properly, a trust helps to pass along wealth or assets to heirs, beneficiaries, charities-even while you are still alive, with favorable tax treatment. Discussing trust options should be an integral part of your wealth transfer planning.
Regardless of the size of your estate, you likely want to be the one who controls how it is distributed. “Gifting strategies”, therefore, should be a part of your discussion with your advisor – the amount to pass along to key individuals, and when, to be sure that the gifts are passed along intact with favorable tax treatment.
Planning for the distribution of an estate of any size can seem complicated-but with the advice of a savvy professional, you can be sure that your assets pass along to your heirs or beneficiaries as you’d wish. Just be sure not to leave the creation of a will, a power of attorney, and / or a trust to “another day”-plan ahead now, revisit your plan annually, and your beneficiaries will be well-taken care of, as you’d intended.
Guido Aloisi, the President of The Financial Solutions Group, provides advice on wealth management and wealth transfers. For more information visit thefinancialsolutionsgroup.com.
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