Asset transfer is a straightforward process. However, for closely held business owners and highly compensated individuals, transferring assets can be a complex process.
Without a formal estate and asset transfer plan, a large portion of your accumulated wealth could be lost to taxes. Worse, the assets you’ve worked your entire life to build may not end up where you envisioned them.
What Happens When You Have Not Made Provisions for Asset Transfer?
A 2017 study conducted by RBC Wealth Management revealed some surprising statistics. Only 54 percent of high-net-worth individuals have a will. And although 26 percent of respondents have a full asset transfer plan in place, almost a third (32 percent) have taken no action for estate planning or wealth transfer.
Should you die intestate (without a will or asset transfer provisions), your estate will transfer to your heirs through the probate process. What they do with what’s left — after estate taxes, probate fees, etc. — is their choice. You have no assurance that your legacy will endure or benefit those you envisioned it would.
Will there be money to send your grandchildren to college? Will the charitable causes you care about see any benefit? Will your family members become embroiled in disputes over who gets which of your valuable (financial or sentimental) possessions?
Do you trust the next generation of your family to manage your wealth? Are you willing to let the government take the maximum share possible?
The Importance of Having a Formal Asset Transfer Plan
Even if your answer to the first question is a resounding “yes,” you likely do not want to diminish the value of your estate any more than necessary at the time of your passing. You must also consider the implications should you become incapacitated and unable to make your own decisions.
In the RBC study, a full third of respondents with no wealth transfer plan in place admitted that they did not trust their children to preserve their wealth. And yet, they were ready to leave the fate of their accumulated wealth to chance.
The complexity of family dynamics — and the likelihood that your family’s dynamics will change repeatedly over the years — requires that you not only establish a comprehensive estate and asset transfer plan, but that you update it regularly.
The final bit of advice that emerged from the RBC study is the importance of financial literacy for young people. Start early in teaching the next generations about saving, giving and wealth preservation. Just because you aren’t confident in the next generation today doesn’t mean you can’t help them become more aware and responsible.
Seek Asset Transfer Advice & Assistance from a Tax Attorney
To create and maintain a comprehensive estate plan, you’ll need to have a team of trusted advisors. A key member of your team should be an experienced tax attorney.
Your estate plan will likely include a will and various types of trusts, insurance policies and whatever other types of financial vehicles make sense for you. Your lawyer may also recommend a plan for transferring some portion of your assets during your lifetime, to help prevent unnecessary erosion of your wealth later.
Your tax attorney will help ensure that your wealth transfer and estate plan complies with all applicable codes and laws. Keeping your financial planning activities legal and aboveboard will help prevent unnecessary taxation and IRS scrutiny.
Cantley Dietrich assists business owners and highly compensated individuals with asset protection, wills, trusts and complex estate planning. Contact us today to schedule a consultation to discuss your asset transfer plans.
NOTE: This article is for informational purposes only and should not be construed as providing legal advice. Use of this site does not create an attorney-client relationship. Contact an attorney to obtain legal advice.