How to Prepare for Wealth Transference

No one ever wants to think of their loved one passing away or being incapacitated due to illness. However, if you don’t begin the discussion of wealth transference now, you may not get the chance later. Having a conversation with your family can help you determine how to distribute your wealth as well as get everyone on the same page. Believe it or not, studies show that 70% of wealth transfers are unsuccessful, mainly due to familial issues. Hence, why having a formal discussion about your estate with potential heirs is so important.

What is Estate Planning?

Owning an estate does not mean being the owner of vast land or a massive property. Everything under your ownership— from car to home and furniture to a savings account— is part of your estate. Estate planning is about delegating the things you own after your death to the people and entities you care about the most. Family, charities, friends, even pets need this crucial document without mistakes and ambiguities to ensure no disputes occur at the time of asset distribution.

Family meeting

When Should You Plan for Your Estate?

The future is never certain, so a level of planning for unforeseen events is always a good idea. When it comes to estate planning, individuals use it to arrange the management of assets during their lives in the event of incapacitation or death.

Estate planning is especially important when:

  • You have children: As the patriarch or matriarch of the family, planning for your family’s prosperity is probably top of mind – as it should be. While adult children likely will not need financial assistance once you pass on, making sure they are not left with a financial burden is important.
  • You have philanthropic goals: In some cases, a person has plans to donate part of their estate to a charity. For tax purposes, it may be preferable to leave assets for a charity or non-profit in a Traditional IRA.
  • You are preparing to be incapacitated due to illness: You can never plan far enough ahead to anticipate an illness. However, if you know your health could significantly decline, you should draft documentation such as a financial power of attorney to appoint someone you trust to make financial decisions when you cannot.
  • You have concerns regarding the probate process: One of the lesser-known reasons for estate planning includes minimizing delays, loss of privacy, and expenses during the probate process.

How Do You Prepare for Wealth Transference?

Preparing for the unknown is never easy. However, giving your loved one’s peace of mind that your finances are properly managed will make preparation much smoother and remove any ambiguities.

  1. Discuss specific financial details with loved ones. Many people avoid talking about personal finances because it can be an uncomfortable conversation. However, it’s important to ensure your loved ones are familiar with the details of your estate so, if your circumstances change, they will be well prepared to manage it or oversee the assets properly.
  2. Involve loved ones in the estate planning process. While discussing your finances with your family or other loved ones is important, involving them in your estate planning process is just as—possibly, more—important. This will help generate dialog about the details of your estate, how it will be distributed, and to whom it will be distributed.
  3. Discuss your values and hopes for business assets. It’s not wise to assume that your family will continue with any business ventures you’ve begun once you’re unable to. Discussion your vision for a business will help your loved ones plan for the business and who will assume control—whether it be a family member or an outside party. Clarify now so they aren’t left guessing later.
  4. Organize financial documents and keep them centrally located. If you’re not already, it’s time to organized all your important documents so your loved ones aren’t left sifting through piles of documentation. Keep all of your important documents related to your estate in a secure, but central location and inform your family members of that location.

Let the Professionals Help You Protect Your Assets

At Peak American Financial Group, we have strategies to help you protect your assets and remove uncertainty from your financial planning. Contact Peak American today to find out how you ensure your assets are left to your loved ones tax-free.

InformationPage Senior Calculator
  1. Discuss specific financial details with loved ones. Many people avoid talking about personal finances because it can be an uncomfortable conversation. However, it’s important to ensure your loved ones are familiar with the details of your estate so, if your circumstances change, they will be well prepared to manage it or oversee the assets properly.
  2. Involve loved ones in the estate planning process. While discussing your finances with your family or other loved ones is important, involving them in your estate planning process is just as—possibly, more—important. This will help generate dialog about the details of your estate, how it will be distributed, and to whom it will be distributed.
  3. Discuss your values and hopes for business assets. It’s not wise to assume that your family will continue with any business ventures you’ve begun once you’re unable to. Discussion your vision for a business will help your loved ones plan for the business and who will assume control—whether it be a family member or an outside party. Clarify now so they aren’t left guessing later.
  4. Organize financial documents and keep them centrally located. If you’re not already, it’s time to organized all your important documents so your loved ones aren’t left sifting through piles of documentation. Keep all of your important documents related to your estate in a secure, but central location and inform your family members of that location.

Guaranteed income for life translates to peace of mind. However, as people near retirement and anticipate losing a steady income, the fear of running out of money plagues them.

If you do not have a stable retirement plan, leaving work can present difficult challenges, made worse by the fear of financial instability.

According to Transamerica Center for Retirement Studies, at least 43% of our elderly Americans claim that even more than health problems or the thought of dying, the idea of outliving their savings is the scariest feeling they encounter regularly.

Anticipating that they will not be able to protect their portfolios against losses in unstable markets, retirees become anxious as they wonder what they would have to do if money is short and resources are scarce later in their retirement.

Dangers of Relying on Social Security and Pensions for Guaranteed Income for Life

To find solutions, most retirees count on pensions or the Social Security System to support them. However, research reveals that it is actually dangerous to rely on these two elements for economic security.

For one, you can never be sure of consistency when it comes to social security benefits because its money reserves may run out.

A recent report published by The Board of Trustees, The Federal Old-Age and Survivors Insurance and Federal Disability Trust Funds state that without changes in the tax system, the Social Security Administration will pay out more in benefits than paid into it. These deficits will begin to eat away at the system’s current reserves. Those reserves are projected to be entirely depleted by 2034. At that point, recipients will only receive around 80 cents per dollar they otherwise would be owed.

As the sustainability of Social Security becomes less certain with each passing year, one cannot expect to acquire a guaranteed income from the system.

Moreover, while social security can fund some expenses, it surely cannot bear the cost of all.

Medical bills, property insurance, and debt repayments are all costs that can pile up by the time you retire. For that reason, it is not wise to depend on the system entirely.

Pensions, too, cannot provide a guaranteed income; this is because pensions include a pool of funds invested on the employee’s behalf. The earnings on those investments generate income to the worker upon retirement. With unreliable returns on the market and shifts in the ability for companies to cover their costs, pensions are not a reliable source of guaranteed income for life.

Given that social security and pensions may not be the best things to rely on, you must have a reliable retirement savings plan.

To do so, you will need guidance from people who can put your concerns to rest. At Peak American, we offer you just that. To get help and learn more about a structured retirement roadmap, contact us today.