Four Family Wealth Transfer Pitfalls to Avoid

family wealth transfer
Picture of Scott Hohman, CFP®, AIF®

Scott Hohman, CFP®, AIF®

Over the next few decades, a tremendous amount of wealth will pass from the Baby Boomer generation to their heirs. Often referred to as the Great Wealth Transfer, the transfer of an estimated $68 trillion will require thoughtful planning on the part of Baby Boomers and their heirs to ensure success.

Having a legacy plan, also commonly known as an estate plan, is critical if you have specific wishes for how your wealth and possessions will be transferred and handled after you’re gone. It’s equally important that heirs understand their roles and your expectations – something a legacy plan should clearly communicate.

The article below touches on four common pitfalls to avoid when planning your own wealth transfer.

#1 Lack of a Plan

It’s challenging to envision a future where you aren’t present, which is the premise behind legacy planning. For that reason and many others, individuals often postpone getting their plans in place. Unfortunately, tomorrow isn’t promised for any of us. If you pass away before you establish your plan, the future of the assets you’ve worked so hard to attain will be just as unpredictable.

Did you know that nearly half of all Americans who are 55 or older do not have a will? It’s never too early to start your legacy planning, especially if you need to include specifications regarding a family-owned business, cherished heirlooms, or beloved charities.

That plan can change over time as needed but having a plan of some kind is the most essential part. Your wishes can’t be followed if no one knows what they are. 

SEE ALSO: Estate Planning: How to Leave Money to Your Kids – But Not Their Spouses


#2 Poor Communication   

Aside from having a plan in place, clear communication about that plan is the next most important factor in a successful wealth transfer. If your heirs are to be the stewards of your assets, they should understand what your overall vision and goal for your plan is.

This kind of clear communication can help prevent conflicts and disagreements among heirs and family members by addressing any potential issues while you’re still alive. Invite all those involved in your legacy planning to be a part of the process and conversation. You don’t have to drill down to the dollars and cents, but you should share your goals, timeline, and the guiding values that are shaping your plan.

If your plans are clear and you’ve been able to address any questions personally, that should go a long way toward limiting confusion and negative reactions between family members after you’re gone.

#3 Lack of Preparation

Just as you need to get all of your legal documentation in place, such as your will, healthcare power of attorney, financial power of attorney, and trusts, you also need to ensure that your heirs are equally prepared for the wealth transfer. They should have a solid understanding of their individual roles within the legacy plan.

Set a meeting with all of those involved during which you review the plan, paying close attention to its intended goals and guiding values: what is it trying to accomplish and how will each person help achieve that? How can heirs work together to ensure the plan is being carried out as intended in the years following your passing?

SEE ALSO: The Essentials of Estate Planning


#4 Missing Key Details 

Getting a financial plan in place is imperative but making sure the details are included in that plan is just as important. For example, one of the biggest pitfalls in legacy planning is the failure to consider tax implications or legal issues that could affect your plan.

When crafting your plan, bring in key professionals – a financial advisor, tax specialist, and estate planning attorney – to work together and ensure important details aren’t overlooked. One particularly challenging area is taxes, which frequently change over time. For example, many of the provisions in the Tax Cut and Jobs Act of 2017 are set to expire in 2025. This legislation greatly affects tax rates, brackets, and estate and gift tax exemptions for individuals. Understanding how current and upcoming legislation such as this can impact your plan is critical to its overall success.

Concluding Thoughts

Successful wealth transfers combine thoughtful and professional preparation with clear communication among all involved parties. A good plan accounts for important details but maintains the flexibility to evolve as needed. By planning early and practicing open and honest communication, you can mitigate negative reactions among heirs and potential challenges to your overall plan.

Though it may seem obvious, properly preparing your heirs and making them aware of their roles and responsibilities in relation to your plans can be the difference between a smooth transition and a problematic one. Then, you need to trust that they will adhere to the plan and vision you have established. 

If you are ready to begin legacy planning, the financial experts at Resolute Wealth Advisor can help you get started. We understand that each client’s goals are unique, and we partner closely with you to provide helpful guidance for your finances now and into the future. Start the conversation by reaching out to us today.

The views expressed represent the opinion of Resolute Wealth Advisor, Inc. (RWA). The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While RWA believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the RWA’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.

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