Posted By: CFP&WM On: Jul 19th, 2016 In: Money Matters Comments: 0

The Difference Between Having an Estate Plan and Wealth Transfer Plan

Unfortunately, only about 45% of adult Americans have estate-planning documents. Generally, as one accumulates more assets as they becomes older, the probability of having estate-planning documents increases.

When you die without a will or trust, the State in which you reside has laws that determine to whom your assets will go. This may or may not be what you want. But since you did not have your wishes recorded properly, you do not get a choice.

Those that don’t have estate planning documents are dictating your family be exposed to the following:

  • ● Subjected to the expenses of attorneys and courts
  • ● Waste their time
  • ● May not receive what you wanted them to receive
  • ● Become frustrated
  • ● After all that, they may well curse you for not having done the right thing by having obtained the documents before they were needed!

When you die your assets could go to family, friends, taxes, attorneys, appraisers, courts, charity, and other miscellaneous service providers. Having proper estate planning documents can speed up the transfer process, decrease costs, and help keep family harmony.

If you haven’t done so yet, please talk to an estate-planning attorney and get the documents that are appropriate for your situation.

For those that do have estate-planning documents it’s important to understand the difference having the documents and having a Wealth Transfer Plan.

OK, you might say I have estate-planning documents, and I even review them periodically with my attorney but what the heck is a Wealth Transfer Plan. You would be right this is a much less common discussed concept.

Before we discuss the wealth transfer plan, let’s review some of the problems that can occur without such a plan.

Family Discourse

Some families are torn apart because of the jealousy, animosity, lack of trust when the parent passes and the beneficiaries are revealed. Some heirs feel that they were shorted or taken advantage of because they didn’t understand the rationale for the decisions that the deceased had made. This discourse can be magnified with blended families weren’t there is a family business involved.

Loss of Family Wealth with Time

Over 70% of family wealth is lost by the second-generation.

Over 90% of family wealth is lost by the third generation.

The primary reason for these resources slipping away is a lack of communication and understanding and trust amongst family members. Secondarily, the heirs are unprepared to receive their inheritance. Other factors would be errors in financial and tax planning as well as an appropriate investing.

Sudden Wealth Syndrome

Some heirs when they learn of their windfall go on a spending spree or quit working. Many times the benefactor would turn in his or her grave if they knew that all they had worked for many years was being squandered or changed the beneficiary’s work ethics.

Wealth Transfer Plan

It is a series of decisions and actions taken by you for the purpose of preparing your heirs for their inheritance, maintain family harmony and empower the family to make better decisions about what they inherit. It involves:

  • ● Communicating your money values and family goals.
  • ● Sharing your intentions as to heirs or beneficiaries and time frames for transfers. Have everything out in the open while you’re alive and address any bad feelings rather than leaving the family to deal with it when you’re gone.
  • ● Introducing family members to your advisors to help address their questions if any and so that they will introduced to people that they will be working with when you’re gone. (Attorney, tax advisor, certified financial planner)
  • ● Foster a better understanding by the heirs of the family assets and encourage a better foundation of investing so that they are better prepared when the time comes. However, they must know that asset base can change dramatically prior to your passing for a variety of reasons.
  • ● Discussing the options for methods of transfer, including direct gifts, the use of trusts and the importance of philanthropy, if appropriate.
  • ● Encourage family members to establish their own estate planning documents so that they are better prepared to accept their inheritance.

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