Build an estate plan that realizes your vision for your legacy.
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. According to Jill Garvey, senior wealth strategist at Huntington Private Bank®, wealthy families in particular may delay planning 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†.
But this very reluctance can lead to problems. Larry Jones, senior wealth strategist at Huntington Private Bank, recalls one example of parents who got stuck on the question of how to divide their wealth among their children, one of whom had a substance abuse problem. “They didn’t know how to treat all of their children fairly without enabling the one child’s issues,” says Jones‡.
Yet the longer the parents waited, the greater their risk of dying without having a responsible plan in place. Jones notes that if you don’t have a will or other elements of an estate plan, your state may decide for you where your money will go. Even with a will, your bequests can get stuck in probate and are subject to public disclosure.
Lack of clarity about estate planning can also affect family relationships, as heirs and other potential beneficiaries spar over inheritances and control of the family legacy. A survey from the Wealth Counsel noted that 35% of respondents either personally experienced or knew someone who had experienced family conflict as the result of not having an estate plan or comprehensive will§.
Beyond the emotional fallout, such disputes can impede your wishes or even diminish the size of your estate. “My clients want to make sure that what they have goes to whom they want, when they want,” says Garvey. “To do that, you have to be intentional in your planning.” Here’s how that might work.
Assessing your goals
Planning for wealth transfer starts with your goals and values and any special concerns about what’s ahead, says Jones. One of his clients, a widower, was on the verge of a new marriage. “He wanted to protect his substantial wealth while also making sure his new wife and the children from his first marriage would be financially secure,” says Jones. Taking the client’s goals into account, Jones was able to suggest a trust that would guarantee income for the spouse during her lifetime, with the trust principal going to the children after her death.
Understanding your priorities can help you and your advisors align your estate plan with your values. This conversation may also include an assessment of your own lifestyle expectations for the future, to help ensure proper funding even as you consider your estate.
Creating a timeline
Once you reach 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 as they age?” says Jones. “Or is this generational wealth, intended to go to the grandchildren and beyond?” These questions can help you decide whether to make gifts during your lifetime or to pass down assets later. 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.
Assembling an experienced team
“For wealth planning to work well, you need the right financial team,” Jones says. Your Huntington Private Bank 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 perhaps others, especially 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 considered and that your investment plan is diversified, Jones says.
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,” Garvey says, “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,” Jones says. “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 them to handle the wealth they receive. There could be basic financial education as well as discussion of protecting assets, charitable giving, and other issues.
Assessing your assets
“Families have a variety of assets,” Jones says. “There may be real estate in several states, multiple retirement accounts, and investment accounts.”
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 which component of your plan.
How your wealth transfer plan is implemented depends on your goals and needs. Many estate plans use trusts, which can help you better control how and when funds are distributed. For instance, a dynasty trust can help provide income to a certain class of heirs 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,” Garvey says. In the case of the couple agonizing over how to distribute assets to their children, Jones was able to suggest a structure for distributions that used similar parameters for all of the children but added benchmarks the child with substance abuse issues would have to meet.
Trusts and other kinds of financial structures can help you meet your charitable giving goals as well as other priorities. For example, Garvey recently worked with clients who 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.
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 may want to revisit your estate plan every three years or whenever there’s a significant change in your personal situation or a major change in tax laws,” says Garvey.
With open communication, clear vision, and the knowledge provided by your Huntington Private Bank advisor, you can create and maintain an estate plan that helps you realize your vision for your wealth and legacy.
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