How to Practice Proper Legacy and Estate Planning Carmichael Hill

Transferring wealth to your family is a complex process. You’ve made the money and have likely taken steps to protect the money, but you also need to prepare your family to inherit the money. A significant number of wealthy families lose their wealth by the third generation.[1]  Not everyone that comes after you will have the same financial aptitude that you do, and this has some unique risks and challenges. It’s important to put strategies in place to maintain your family’s wealth. Everyone with something to pass down should construct the foundational building blocks to their estate plan.

Documentation: Your base building blocks

You’ll need a series of documents in place to make sure that wealth transfers from your estate to your beneficiaries as intended. This could mean having a will in place naming your spouse and children, for example. It could also include a trust or series of trusts created for specific beneficiaries. This can be especially useful if you have a special needs child or grandchild, have a spendthrift in the family, or are worried about a beneficiary getting a divorce. Trusts can also create a degree of privacy, as they avoid the public probate process that you would be subject to with a will.

End of life care can also be prohibitively expensive and stressful for a family. Naming a power of attorney for healthcare decisions can help. Moreover, arming them with do not resuscitate (DNR) / do not intubate (DNI) orders, if applicable, can help them make the right call if and when the time comes. This can save untold heartache for family members who may not agree on the kind of care you should receive when you’re no longer in a position to speak for yourself.

Lastly, a letter of intent can go a long way. This is rarely legally binding, but it gives your next of kin a good idea of your ultimate wishes. The letter can address things such as what property you believe should stay in the family as opposed to being sold, which heirlooms should go to which person, and why you chose to structure your estate the way that you did. The letter doesn’t ensure that your beneficiaries will follow its contents, but it could help them avoid conflict by succinctly clarifying your wishes.

Communication: The mortar holding it all together

Effective communication is crucial in the wealth transfer process.[2] While it may be difficult to have conversations about wills and other arrangements, it is essential to ensure that your family understands what will happen to your assets when you are gone. If your beneficiaries are aware of your will and can discuss it with you while you are alive, this can help to unite your family and preserve the money that you have worked hard to provide for them.

It can also be useful to have a dialogue with your family about how to manage the wealth that you will transfer to them.[3] A significant number of adults in the US reported that their parents did not provide them with money lessons when they were children, highlighting the need for more open and honest communication about financial matters within families.[4]

Discussing money, even outside the family, is often taboo in America, but it is important to be transparent with your family about your financial situation. If you have experience and expertise in investments and wealth management, it is crucial to provide support and education to your family members who may not have as much knowledge in these areas. Factors such as inflation and taxes can significantly impact long-term wealth, and it is essential to educate other generations in your family about these issues.[5]

Tips of the Trade

Getting your documents in place and communicating effectively with your children is critical, but it still leaves room for some messy clean up later if you’re not careful. Do your children know that you have a safe deposit box? Do they know where you do your banking or where you custody your investment accounts? Can they access your social media accounts after you’re gone? Do they know which company has your life insurance policy, or whether your retiree benefits from work have a death benefit provision? If you keep emergency cash hidden in your house, do your kids know where to find it?

To summarize, it is essential to have a clear plan in place for transferring wealth to your family. Effective communication and the use of the right documents can be invaluable in managing this process and ensuring that your family is set up for long-term financial success. If you require guidance on how to manage your funds and create a long-term plan for your family, you can reach out to us for a complimentary review of your financial plan.

 

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Carmichael Hill & Associates, Inc. is a U.S. Securities and Exchange Commission Registered Investment Advisory firm. Registration does not imply that the SEC has endorsed or approved the qualifications of Carmichael Hill or its respective representatives to provide any advisory services. Advisor does not render or offer to render personalized investment advice or financial planning advice through this medium. Advice can only be given after:

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