Creating an estate plan for your wealth

It’s important that your estate planning supports your legacy goals.

People can get so caught up in their daily work and lives that they don’t take the time to plan for what will come after they’re gone. Wealthy families may feel stuck in the estate planning process either because they’re concerned that making changes now will mean losing control of their estates or they worry about their money’s effect on their heirs. Despite the importance of estate planning, many families still put it off, often during peak earning years when career, family and caregiving responsibilities compete for attention.

But this very reluctance can lead to problems. Consider the parents who got stuck on the question of how to divide their wealth among their children, one of whom has struggled with substance abuse. They were interested in finding ways to treat all of their children fairly without further enabling the one child’s issues.

The longer the parents waited, the greater their risk grew of leaving their loved ones without having a responsible plan in place. If you do not have a will or other elements of a comprehensive estate plan, the laws of your state of residence will determine how your assets are distributed. Even with a will, your bequests can be subject to a costly and public probate process.

Lack of clarity about estate planning may affect family relationships, as heirs and other potential beneficiaries spar over inheritances and control of the family legacy. Family conflict remains one of the most significant risks to effective estate planning, with more recent research showing that disagreements over beneficiaries and decision-making authority are among the most common sources of tension that can boil over into litigation¹.

Beyond the emotional fallout, such disputes can impede your wishes or even diminish the size of your estate. Despite its importance, estate planning remains incomplete for many families, highlighting the value of taking a more intentional and ongoing approach. To ensure that what you have goes to whom you want, when you want, be intentional in your planning.

Here are steps to consider:

1. Align your estate plan with your wealth goals

Planning for wealth transfer starts with your goals and values and is a foundational step in creating an estate plan that reflects your priorities. For example, a client who was widowed and on the verge of starting a new marriage wanted to create a plan to preserve an inheritance for his children from his first marriage while ensuring his new wife would be financially secure. Taking the client’s goals into account, a trust was designed that would guarantee income for the spouse during her lifetime, with the trust principal going to the children after her death. If the client had not put that plan in place, he may have risked leaving his new bride and children with financial friction points during an emotional period.

Understanding your priorities can help you and your advisors align your estate plan with your values. This conversation will include an assessment of your own lifestyle expectations for the future to help ensure your needs are fully funded along with your estate transfer goals.

2. Create an estate plan timeline

Once you settle on a general idea of how your wealth should be distributed, the next step is to determine a timeline. Is this something you want the children to have now or when they are older? Is this generational wealth intended to benefit grandchildren and beyond?

These questions can help you decide whether to make gifts during your lifetime or to simply pass assets at death. This timeline discussion can also help frame your philanthropic goals in the context of your overall plan. Some families choose to begin distributions to charities only after a certain percentage or dollar amount of assets has gone to family members.

3. Work with estate planning experts

For wealth planning to work well, you need the right financial team. Your Huntington Wealth Management advisor can serve as point person and work closely with other key players, who may include an estate planning attorney, a tax advisor, a family consultant, a portfolio manager and possibly other specialists, particularly if you own a business. Your advisor can also communicate with representatives of other financial institutions to help make sure all of your assets are included in a coordinated plan and that your investment approach is diversified.

4. Communicate your estate plan

Communicating with your beneficiaries about what’s ahead is also a key part of the planning process. You’re preparing the heirs for the assets, not just the assets for the heirs.

How much you tell your children and other beneficiaries about your wealth and your plans for distributing it is up to you. Some parents want to limit what they share, perhaps letting the heirs know the general terms of how assets will be divided but without revealing dollar amounts. Others hold things even closer to the vest because plans may change.

The relative maturity of your intended beneficiaries may be another factor to consider, and communication involves preparing beneficiaries to handle the wealth they receive. This may include basic financial education as well as discussion of protecting assets, charitable giving and other issues.

5. Assess your assets

Families have a variety of assets. There may be real estate in several states, multiple retirement accounts and investment accounts. Recent changes to retirement account rules can affect how inherited assets are distributed, making it especially important to review beneficiary designations and consider how retirement assets align with your broader estate plan.

Part of the planning process involves looking not only at what you own but also at the costs of ownership. Keeping a family cabin, for instance, may involve ongoing expenses for maintenance and taxes. Appreciated securities, meanwhile, could result in future tax liability that could be limited if those assets are passed along through your will or given to charity. This part of the planning process can help determine which assets should fund each component of your plan.

6. Structure gifts

How your wealth transfer plan is implemented depends on your goals and needs. Many estate plans use trusts as part of a broader wealth transfer plan, which can help you better control how and when funds are distributed. For instance, a dynasty trust can help provide distributions to a current generation initially while preserving trust principal to benefit future generations.

This kind of trust can help protect assets from the impact of divorces and from seizure by creditors or predators. In the case of the couple agonizing over how to distribute assets to their children, a suggested structure for distribution may be one that used similar parameters for all of the children but added benchmarks for a child with substance abuse issues to be met before distributions.

Trusts and non-profit entities can help you meet your charitable giving goals, as well as other priorities. For example, a client decided to start a family foundation, not only as a vehicle for their own giving, but also as a tool for passing along their philanthropic values to their children. Others create donor-advised funds.

Once you have a wealth transfer plan in place that reflects your wishes, values and assets, you’ll need to make sure the plan stays current. You should review your estate plan every three years or sooner if there’s a significant change in your personal situation, family structure, asset levels or applicable tax or retirement planning laws.

With open communication, clear vision and the knowledge provided by your Huntington Wealth Management advisors, you can execute and maintain an estate plan that helps you realize your vision for your wealth and legacy. It’s never too late to start preparing for the passage of wealth, but it’s better to start as soon as possible.