Raleigh NC Financial Advisor: How to Make a Wealth Transfer
A well-designed plan protects your wishes and helps avoid conflict among your heirs.
A wealth transfer plan serves as a roadmap for transferring your assets from your estate to your chosen beneficiaries. Currently, the baby boomer generation is experiencing the most substantial wealth transfer ever witnessed. In the next 25 years, an astonishing $68 trillion is projected to be passed down to their successors. However, the necessity of a wealth transfer plan is not limited to older individuals or those with substantial estates.
Individuals can create a comprehensive plan to make sure their wishes are carried out and their assets are distributed correctly. This includes having a will and making sure their beneficiary designations are in order.
Without such a plan, assets may become subject to probate court, where decisions regarding their allocation are made. This process often proves to be time-consuming and costly. Moreover, documenting intentions not only helps prevent court involvement but also mitigates potential conflicts among beneficiaries.
Here’s a look at the steps you should take to start your wealth transfer plan today.
Review your assets
To initiate the construction of a wealth-transfer plan, the initial step involves assessing your assets comprehensively. Begin by creating a comprehensive inventory of your financial holdings, which should include retirement accounts, brokerage accounts, and life insurance policies, along with their respective custodians. Subsequently, compile a list of tangible assets such as real estate and valuable possessions. It may prove beneficial to engage an appraiser who can provide accurate monetary valuations for your home or other properties.
Choose beneficiaries
After compiling the inventory of your assets, the next step involves determining the individuals or entities to whom you wish to designate them. While spouses and children are frequently chosen, it's worth considering extended family members or close friends as well. This is an opportune moment to contemplate the type of legacy you desire to establish. You might explore the option of supporting charitable organizations, educational institutions, or other nonprofits that hold significance for you.
Write a will
A will serves as a legally binding document that effectively captures your wishes in writing and guarantees the desired allocation of your assets to designated individuals and organizations. It is important to appoint a trustworthy executor who is willing to undertake the responsibility of executing your will. Since wills can be intricate documents, it is advisable to consider engaging the services of a lawyer to assist you in drafting one.
Check your beneficiaries
Funds from retirement plans, life insurance policies, and other accounts will be disbursed to the beneficiaries specified on those accounts, regardless of the instructions in your will. It is crucial to review these beneficiary designations annually and make updates to align with any changes in your wishes or life circumstances. Examples of such changes may include marriage, divorce, the passing of loved ones, or the addition of new family members through births or adoptions.
Choose someone to make decisions on your behalf
Powers of attorney and living wills are legally binding documents that establish who will be granted the power to make financial and medical decisions on your behalf in situations where you are unable to do so. It is crucial to select an individual whose judgment you trust implicitly and who comprehends your wishes explicitly.
Understand estate taxes
The Tax Cuts and Jobs Act doubled the estate-tax exemption to $11.58 million. This means that most individuals' estates are no longer subject to estate taxes. It is advisable to consider gifting if you possess a substantial estate. This will reduce its size and potential tax liabilities.
One approach is to make monetary contributions to charitable organizations.
Additionally, you have the opportunity to gift up to $15,000 ($30,000 for couples) per person annually without incurring any gift taxes. There is no limit on the number of recipients you can give to. Even if your estate falls well below the exemption threshold, tax-free gifting can serve as a way to witness the positive impact of your bequest on the lives of your heirs while you are still present.
Keep key people informed
Ensure that individuals assigned specific roles in your estate are fully aware of their responsibilities. It is also valuable to have open conversations with your heirs about your intentions and the reasoning behind your decisions. By communicating your plans, you can proactively prevent potential conflicts among your heirs in the future. Store your estate planning documents, along with other essential financial information like account passwords or property titles, in a secure location, and inform your heirs about how to access them when needed.
Bottom Line
The intersection of financial, legal, and family issues can make wealth transfer a complicated matter. But a well-crafted plan can help ensure the process goes smoothly. Enlist your financial and legal advisors’ help to build a sound plan that ensures your wishes will be honored.
Sources:
https://info.cerulli.com/HNW-Transfer-of-Wealth-Cerulli
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This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
