How can you provide your children, and their children, with financial stability now or when you’re no longer here? What wealth transfer strategies are best for your family? Unfortunately, we can’t give you all the answers in the context of one blog post. But we can get you started.
As you likely already know, the transfer of wealth from one generation to another is a delicate process. Emotions can run high when making wealth transfer plans and/or discussing financial information with family members. Homer Carrillo, Shareholder and leader of Weinstein Spira’s family office practice, and Amy Sbrusch, Tax Manager, recommend the following tools to begin the process of setting future generations up for financial success.
Besides thinking about the lifestyles of your children and how you’d like for them to be supported financially, it’s also important to consider more critical needs. For instance, if you are the caregiver for a special needs child or a parent, you’ll want to develop special plans to ensure they are taken care of in your absence.
Likewise, do you have a family business that needs to be considered? If so, who will run the family business moving forward? Will it be your children or grandchildren or will your business need to be sold?
Communication with your advisor is an important first step in a much longer process. During an initial meeting, you should be discussing what your estate looks like, identify your various assets, discuss your family members’ individual needs and then determine the best options based on your current assets and future needs.
Your advisor will discuss some of the following wealth transfer options and the associated estate tax responsibilities with you to determine which combination makes the most sense for your family.
There can be other very beneficial reasons to set up trusts, in addition to transferring wealth.
Once each of these options have been considered, it’s time to decide which option (or combination) is the right one for you and your family. Questions your advisor will likely ask you:
“What are your future needs?”
“What do you want the future to look like for your children and/or what are their needs?”
“Will you want to sell your business in the future or pass it down to children?”
“Which tax results and estate tactics are more in line with your estate planning goals – a family partnership or a trust?
“Which of these assets will continue to grow?”
It’s important to figure out how much information and when to share with your family. Furthermore, it’s important to know your children and how best to approach them about these sensitive issues. “If it’s going to be highly emotional, you may want to include a third party (your advisor), so they can help keep things in perspective and explain the reasoning behind decisions,” Homer recommends.
A sound strategy typically follows this type of pattern: Meet with your advisors first to develop an overall plan. Follow this meeting with a family meeting to discuss what has already been accomplished, while also hearing about and discussing how other family members feel about the proposed plan. This is where educating future generations is especially important.
Because it’s impossible to know what the tax laws are going to be moving forward, it’s important to stay on top of legislative changes and in touch with your advisor. This will put you and your family in the best position to ensure that your assets are properly transferred and preserved for your family or other recipients.
Every family is dynamic and has different needs. When developing your wealth transfer strategy, it’s important to consider some of the ideas listed above, but to recognize that this is merely the tip of the iceberg. The wealth transfer process is not a one-time occurrence, but rather a lifetime priority you will need to engage with and revisit time and time again.