Wealth Transfers: 5 Unexpected Obstacles To Plan for Before It’s Too Late

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Are you planning to leave an inheritance or transfer your wealth? It’s important to avoid making mistakes that may create serious issues and complications for your family.

Here are the five unexpected obstacles to consider when conducting a family wealth transfer. 

Lack of Preparation

One of the most common mistakes in transferring wealth is a lack of preparation. 

Julie Virta, senior financial advisor at Vanguard, said many individuals push legacy planning off due to difficult emotions that might arise from envisioning your own death. However, continuing to push this planning off each day can deter the proper execution of your goals and wishes. This is especially true if you die before your plan is in place.

Virta recommends creating a legacy plan as soon as possible. A legacy plan should be established with a financial advisor, an estate planning lawyer and a tax expert.

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Failure to Communicate

It is not enough to create a legacy plan. This plan must be communicated with all beneficiaries and relevant stakeholders. Communication sets expectations about the inheritance and clearly defines the roles of those involved, Virta said. If there isn’t any clear communication, it can easily cause confusion or even a rift or conflict among all involved in the wealth transfer. 

To facilitate clear communication, Virta recommends setting up regular meetings with your partner, family and other beneficiaries. These meetings can help ensure all are aligned on your financial situation, long-term goals and preparations for the unexpected. 

Not Looping in Beneficiaries 

Some beneficiaries might not know much about the current state of your finances. If they are completely in the dark, Virta said, it can be good to make them privy to your existing accounts and to introduce them to your financial advisor and any other professionals you work alongside. 

Remember: Those transferring wealth are allowed to share information at the level of detail where they’re most comfortable.

Not Considering Tax Implications 

The value of an inheritance can significantly be impacted by taxes. 

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Darren L. Colananni, CFP and wealth management advisor at Centurion Wealth Management, recommends working with a qualified tax professional because that expert will understand tax implications of wealth transfer and implement strategies to minimize tax liabilities. 

Not Reviewing Estate Planning Documents Regularly

JP Dowds, CFP and wealth advisor at Marshall Financial Group, recommends reviewing your estate planning documents every few years.

Dowds uses the example of estate tax exemption. In 2017, it was $5,490,000. Today it’s $12,920,000. In 2017, the coronavirus pandemic was also three years away and heirs were seven years younger than they are today. 

“Today, a lot less people are subject to estate and inheritance taxes, your beneficiaries are a lot older and your views on the importance of family, friends and community may have changed,” Dowds said. “Be flexible and willing to make changes. What made sense a few years ago may no longer make sense.”

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