By Wealth Management Solutions
Most times, we dedicate a significant part of our life’s work to building a stable financial future for ourselves and our loved ones. You’re most likely investing your time, effort, and resources into various assets and financial instruments with the hope that they will provide for your heirs when you’re no longer around. However, it takes more than just accumulating wealth to preserve the financial future of your loved ones.
Whether your heirs receive your investments in the future depends on several factors that combine to make for an effective wealth transfer strategy. At Wealth Management Solutions, we are dedicated to providing effective strategies for wealth management. Let’s explore key aspects you need to consider so that your assets are passed on to your loved ones according to your wishes.
Estate Planning
Estate planning involves creating a comprehensive plan detailing how you want your assets to be managed and distributed upon your passing. Key legal components of estate planning include a will, trusts, and powers of attorney.
In a will, you name the beneficiaries of your assets and designate who receives what, including investments. It also allows you to name guardians for minor children. Without a will, your assets will be distributed according to state laws.
A trust is a legal arrangement that allows you to assign the management of your assets to a third party on behalf of the beneficiaries. The third party, referred to as the trustee, has a duty to manage and share assets according to your specifications.
In case of incapacitation, you can grant another person the authority to make legal and financial decisions on your behalf regarding your investments using a power of attorney.
Beneficiary Designations
Investments such as life insurance policies and retirement accounts (401(k)s and IRAs) allow you to designate beneficiaries from the onset. Upon your passing, these investments can pass directly to the named beneficiaries without being subject to the probate process. For investments without an initial beneficiary setup, you can designate beneficiaries through a will or power of attorney.
Probate Process
The legal process that guides the inheritance or transfer of a deceased person’s estate is known as probate. In a probate process, the court oversees the distribution of your investments or assets according to your will. If you did not write a will, the probate process complies with the state laws, typically the deceased’s state of residence.
Here’s a summary of the key events in a probate process:
- Confirmation and validation of the decedent’s will or the relevant state laws if there’s no will
- Appointment and confirmation of the executor
- Inventory and assessment of the assets to determine the fair market value at the time of the decedent’s death
- Official notice to supposed creditors to file their claim within the specified period
- Payment of debts and taxes on the estate
- Distribution of the assets as stipulated by the will or state laws
State Laws
The laws regarding inheritance and estate taxation can vary significantly from one state to another. You need to be aware of the relevant laws in your jurisdiction and consider how they may affect the distribution of your investments.
For instance, the California intestacy law under the Probate Code provides that the surviving spouse of a decedent gets a 50% intestate share of the community properties of the decedent. In New York intestacy law, the surviving spouse is entitled to the first $50,000 and half of the balance while the children inherit the rest.
Communication
Beyond legal actions, effective communication with your potential heirs is one of the most efficient ways for them to receive your investments according to your plan. Discussing your estate planning with your family makes it easier for your heirs to understand your intentions and expectations, reducing the potential for disputes after your passing.
Also, you can educate your heirs on proper wealth management through financial literacy programs. This is an effective way to prepare them for their future roles and responsibilities in managing your investments and making informed financial decisions.
Seek Professional Guidance
There’s no one-size-fits-all approach to passing your hard-earned investments on to your heirs. That’s why it’s recommended to consult with a wealth advisor for informed decision-making. A wealth advisor can tailor a plan to your specific financial situation, investment goals, and family peculiarities to offer you confidence that your wealth will get into the right hands when you’re no more.
At Wealth Management Solutions, our team is available to provide professional guidance on how to effectively transfer your wealth to your heirs. Schedule a complimentary consultation by contacting us at (949) 475-9700 or info@wms-llc.com.
About Wealth Management Solutions
The story of origin: Wealth Management Solutions was created in 2003, following the personal family tragedy felt by the founding partner of the firm. Richard Riva lost his father unexpectedly and before any legacy planning was done that could have extended his family’s legacy beyond the fourth generation. Our partners and team members all share similar experiences due to a lack of planning for their families and are committed to our clients not experiencing the loss of their legacies due to a lack of planning. This is why we say: Our Planning; Your Future.
All investing involves risk, including loss of principal. No strategy assures success or protects against loss.
The opinions voiced in this material are for general information only and are not intended to provide specific investment advice or recommendations for any individual.
