Wealth Transfer Planning

Planning for death and the transfer of wealth to heirs probably does not top your client's list of fun things to do. However, as we begin a new year, there's no better time than the present to address the inevitable. Eventually, we each pass away. Your client's will no longer live on earth and be able to care for their family. They can leave them the means to continue to care for themselves though.

During the period of the next 50 years, the largest transfer of wealth in history will occur with an annual asset transfer of more than $1 trillion. The 50-year total of those transferred assets will be $59 trillion. Of that number, heirs will receive $36 trillion. Approximately 70 percent of wealth transfers fail due to familial issues. You can use formal wealth transfer planning to legally designate exactly which family members should receive each asset. This reduces conflict between family members and creates a simple legal process for probate.

What is Wealth Transfer Planning? 

The term wealth transfer planning refers to the process of financial planning strategies that transfer wealth and assets to heirs and other beneficiaries after your death. Methods of wealth transfer include estate planning, life insurance, wills or trusts. The goal of wealth transfer planning is the smooth transfer of the estate to the individuals or groups designated at the lowest taxation rate, but with the highest earned interest rate possible with little to no risk involved.

Options for Transferring Wealth 

The most common procedure for wealth transfer, also called a legacy transfer, is to combine three main transfer methods through the process of estate planning. Estate planning combines a will and testament with a trust and life insurance policies to reduce risk and enable all asset types to transfer seamlessly.

Will: A will or testament refers to a legal instrument permitting the testator to legally decide the distribution and management of their estate after death. The document directs the distribution of personal and real property. It provides a common method of distributing wealth to heirs that include homes, art, coins, stamps, other collectible items, and heirlooms.

Trust: You can establish a trust to reduce estate taxes while transferring the legal property titles to an individual or entity. The designated trustee acts on the part of the decedent to immediately distribute assets that allow the beneficiaries to avoid probate court.

Roth IRA: Many people may also believe that transferring money through a Roth IRA is a strategic approach. However, the Secure Act forces beneficiaries to take money out over the next 10 years. Ideally, you would want to have your money transferred our of the IRA account before death.

Life Insurance: Life insurance provides a tax-effective way to conduct wealth transfer. You can leverage various policy types to provide funeral funds, college funds, annual income and more. Permanent life insurance provides tax-deferred cash value accumulation and an income-tax-free death benefit. Some states provide protection from creditors of this type of inheritance.

Get started today protecting your family and its future assets. Visit Advisor's Resource to learn more about how you can lastingly provide for your loved ones, help them avoid probate court and avoid hefty taxes on their inheritance.