Wealth Transfer Versus Estate Planning


When you think of estate planning, what comes to mind?  Discussions or documents?  Attitudes or attorneys?  Discernment or death?  Conversations or control?  Timely  transitions or tax efficiencies?  If you start with the former, the later will be better utilized for your family to succeed financially and beyond.

This is the difference between the wealth transfer process and traditional estate planning.  Both are needed, but wisdom in process and application is warranted.

If you are going to transfer financial wealth, first pass  on insight and sound judgement. Wealth rarely creates wisdom!  How are you preparing your heirs?  You would not let someone fly a plane that is not competent at the controls.  Money is a complex tool that, as your life becomes more complicated, needs to be passed on prudently and proficiently.

The traditional estate planning process which primarily revolves around documents should be done as your financial situation changes over time – usually every five to 10 years.  The wealth transfer process involves ongoing conversations with family members as the context of your life situation changes.  How old are you and how old are your children or heirs?  Is there unity in the family? What family dynamics or considerations are you aware of?  What is the nature of your wealth (inherited, created)?  Considerations are much more dynamic than just the surface transition of material assets.

If you love your children equally, you will treat them uniquely.  You need to understand what the ramifications of your decisions will do to each of your heirs.  Children raised in the same family will handle money differently.  You want to take the time and intentionally come to conclusions on what is best for each of your children or heirs.  Be cautious to never manipulate behavior.  Never deny them the opportunity to find fulfillment through meaningful employment or the need to provide for their own family. Never let money matters come between spouses, or parent and child.

Warren Buffet –  the perfect amount to give to children is “enough money so that they would feel they could do anything, but not so much that they could do nothing.”

Do you want to do your givin’ while you’r livin’ so you’re knowin’ where it’s goin’?  On Christmas day, 2009, I opened a small box from my aunt.  Accustomed to the traditional gift of brandy laced fruitcake, I was taken aback as her wedding ring peered back brightly out of the box.  “I wanted you to have it now”, so I could watch you enjoy it.  That she did!  She would proclaim to her table mates at assisted living  “that is my ring – isn’t it pretty on her”.  Even as she slipped into dementia, I would hold her hand and she would touch it – reconnecting with fond, unspoken memories.

Current estate tax laws allow you to give up to $14,000 to anyone and everyone you want without having to file a gift tax return.  The current lifetime exclusion is $5,450,000.  You don’t need to die to pass this on.  The timing component in wealth transfer is very important.  Once you set your personal financial finish lines, and answer the question of “how much is enough”, you free yourself up without fear of missing out, or lacking in your personal provision.  If you want to give while you are alive, make sure there are no strings attached and that you are giving in ways that will truly help them help themselves, not hinder them from their potential.

The most important piece in the wealth transfer process is the “talk”.  Should you have a family conference?  How do you want to communicate your reasoning behind decisions?  How do you put expectations on everyone’s part out on the table?  How do you discuss the process and that nothing is set in stone?

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