It is estimated that assets to the value of around $30 trillion will change hands in a country such as the United States over the next 30 to 40 years, as the Baby Boomer generation transfer wealth to their heirs. Whether each individual transfer is on a large scale or a small scale, wealth preservation requires a certain amount of planning.
A recent study has found that the majority of people in Europe, the USA and other industrialized countries are not fully prepared. In cases where benefactors had a comprehensive wealth transfer plan in place, they were more than twice as likely to be confident that their wealth would be preserved through the next generation. Working with expert financial planners and advisors can ensure complete financial literacy for both benefactors and beneficiaries, helping to ensure families can maintain their assets across the generations.
Dr Edgar Paltzer is an attorney-at-law operating in Switzerland, with estate planning, wealth structuring and succession planning for family establishments among his preferred areas of practice. A detailed explanation of what wealth transfer means can be found in the PDF attachment to this post.
Prepare Your Heirs
One of the biggest reasons for failures in terms of wealth transfers is unresolved issues within the family. As many as 70% of wealth transfers do not go according to plan, with family dynamics being the key reason for this. With so many wealth transfers being unsuccessful, it makes sense to involve the heirs in the estate planning process, to avoid conflict later on.
Sharing information with heirs also helps them to be best placed to properly manage assets once you are gone. Beginning a dialogue about estate planning while you are still alive can smooth the way for continued cooperation between heirs once you are gone. If you are bequeathing a company or some other form of large investment, take the time to share your hopes and values for this asset.
The embedded infographic contains a glossary of some common legal terms used when creating a last will and testament.
Create an Estate Plan
Engaging the services of a professional estate planner allows you to make a comprehensive estate plan that fully covers everything you need it to. An estate planning attorney will be able to help you avoid probate.
The estate planner will also be able to help uncover all the ways in which to reduce or avoid taxes on inheritance, using a variety of advanced techniques to reduce the burden of the tax bill. Beneficiaries are better protected when there is an estate plan in place. This plan can detail exactly how you want money to be distributed and put into place clauses that will ensure the funds and assets you leave end up in the pocket of the person you want to leave them to.
In the case of beneficiaries who are minors, this might involve appointing a trustee or guardian to manage their interests once you are gone. The short video attachment explains the role of a guardian.
Other clauses may protect a child with an overbearing spouse or an adult who has demonstrated irresponsibility with money in some way. Your estate plan will help protect your assets both throughout your lifetime and once you are gone.
The Inheritor’s Perspective
Being bequeathed a large sum of money or valuable assets can reshape the financial outlook of the inheritor. The services of a professional adviser can help the inheritor maintain the right perspective, both during the estate planning phase and once they inherit. As the benefactor, it can help to create peace of mind that your beneficiaries are capable of coping both practically and emotionally once a wealth transfer occurs.