Ten Tips You Should Know About Wealth Transfer

wealth transfer planning

Looking for estate planning help in Arizona? If you’ve amassed significant wealth or belongings over your life, having a clearly-developed plan that considers taxes and individual desires can help you successfully pass things on. Our estate planning lawyers in AZ are equipped with the background knowledge, experience, and resources to help you craft the right plan for you.

Passing on your assets to future generations is an exciting proposition and one that allows your legacy to be extended far into the future, but following the appropriate tips with the help of an experienced lawyer is strongly recommended. Wealth transfer can be very problematic if you do not have the appropriate strategies and tools in place to protect your interests. The following top tips can help you manage family wealth well into the future.

Knowing that you have an attorney at your side to assist you with this process empowers you to pass on the maximum amount of assets with minimal tax consequences. A long-term plan and the one that can be adjusted as your needs warrant is important for your future.

While your estate plan and your wealth transfer plan are not necessarily the same. Your wealth transfer plan has more complex considerations like maximizing and protecting wealth and may also include asset protection planning.

Read on to learn the top ten tips for wealth transfer planning.

Tip #1: Manage Family Financial Discussions

Having good ground rules for family discussions on money can help to illuminate your loved ones about the assets that may be in play and what they can do to protect it.

Since the vast majority of wealth transfer relies on the second and third generation successfully managing it and passing it on, having quality conversations now with your loved ones can increase the chances of multi-generational wealth transfer. Be ready to initiate family discussions early to bring up detailed questions and allow parents to have a final say about their finances and care.

Tip #2: Think About Readiness

Parents should calculate any available retirement income and estimate of the costs for their lifestyle during retirement, including a plan for health care expenses. Asset transfer should not be considered until the parents have a holistic view of how their future will be protected during retirement.

Tip #3: Include an Estate Plan

Review and update your estate planning documents periodically. It is important to review your documents with an estate planning attorney every few years to insure they comply with any recent changes in the law and reflect your current wishes regarding the disposition of your estate and the persons responsible for administering it. Should there be any major family events, such as births, deaths, marriages, or divorces, the documents should be reviewed sooner.

Plan for your life as well as your death- use documents like a power of attorney drafted by an AZ estate planning lawyer to help ensure that others can immediately step in if you are unable to make decisions for yourself.

Tip #4: Choose the Trustee or Executor Appropriately

If you have significant assets in play and the trustee or the executor will be responsible for distributing them, this should be a person you trust and one who is comfortable communicating with your beneficiaries. Without the right person serving in this role, the chances of a conflict could be much higher.

Anyone who is serving in an important role in your wealth transfer plan should be a person you trust who is well-equipped for the job.

Tip #5: Keep Papers and Documents Located in A Safe Place

All key documents and papers should be stored in a safe location after you have put together the right wealth transfer plan. Your attorney should have copies of all the relevant materials so that he or she can be contacted immediately if something happens to you.

Tip #6: Begin Early

Never wait until the last minute to part with your assets. Unfortunately, this is a mistake many people make. By then you could have been wasting valuable time to pass on tax free gifts. For example, you could give away $14000 per person per year without tax consequences. If you begin early you could make a big dent in the taxable estate which you would otherwise leave behind.

Tip #7: Use Trusts

There are a variety of ways to use trusts to transfer wealth. Grantor retained annuity trusts, intentionally defective grantor trusts, dynasty trusts, and spousal credit shelter trusts are all methods of passing on assets to future generations. The right tool for you can be identified by scheduling a consultation with a lawyer.

Tip #8: Consider Converting IRAs

If you currently have a traditional IRA, you may want to consider converting it to a ROTH. This means that your heirs will inherit it free of any tax obligation. While this might not be as glamorous as passing on a cash gift, this has continued growth potential and tax benefits when incorporating it into your plan now.

Tip #9: Make Sure Life Insurance Policies Protect You

Another way to transfer wealth to your loved ones with minimal tax consequences is life insurance. Loans taken against the cash value of life insurance are not taxable; however, they must be paid back with interest or they will reduce the benefit payable upon death.

Life insurance proceeds are not taxable to the beneficiary. If you purchase a policy when you are younger and in good health, you will pay a significantly lower premium than you would purchasing a policy later in life.

Tip #10: Consider Charitable Giving

Your choice about how to pass on your assets may also include charitable donations. The right tools for doing this are extremely important and choosing to make gifts now and the right type of gifts to charities can maximize the tax benefits for you and give as much as possible to the charity in question. Your estate planning lawyer is a crucial asset to consider working with as you develop a wealth transfer plan.

Our Arizona estate planning firm can help you with all your powers of attorney, wills, trusts, and other key strategies for your future. Don’t wait to call us to learn more about how we can help you.

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