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Sep 22, 2020 The Atkinson Daley Group | Baird Retirement Management

Looking to Preserve Your Legacy? 5 Strategies for Making Wealth Last

Social Security

You’ve probably heard the saying, “From rags to riches to rags in three generations.” It’s an unfortunate truth for many well-off families: By one estimate, a staggering 90% of wealthy families will spend through their entire estate within two generations.

. Here are five strategies to help preserve your estate through the years for your heirs.

        • Open up the lines of communication. While you might be reticent to reveal exactly how much you’ve accumulated, leaving your beneficiaries unprepared for a potential windfall could be a mistake. An open dialogue allows questions and concerns to be addressed prior to transferring an inheritance. This also gives you an opportunity to talk about your family history and the values you want to pass down, as well as share in – and potentially help build – the future for your kids and grandkids.
        • Talk to an estate attorney. The current lifetime gift tax exemption in 2020 is $11.58 million ($23.16 million per couple), which means you can gift up to $11.58 million in assets without paying federal estate taxes. If you anticipate transferring more than that, a good estate attorney can advise you on how to shield your assets from being taxed at a higher rate. This tax exemption is due to sunset in 2026 and revert to $5 million, which is why establishing a relationship with an estate attorney who stays current on the ever-changing tax code is important.
        • Keep your estate plans up-to-date. It’s easy to let your will, living will or other estate plans fall out of date – updating them can be time-consuming and potentially costly, and it often involves difficult decision-making. However, the only way to guarantee that your wishes are reflected appropriately upon death is to have formal, legal documents kept current. Also, if you’re concerned about future generations spending your legacy too quickly, consider a trust. Trusts are often used to control how, when and to whom assets are distributed. For example, you can stipulate that assets from your estate should not be passed until your beneficiaries reach a certain  age – this can offer protection if you feel your heirs might not be mature enough to manage their inheritance wisely. An estate attorney can discuss with you the difference between irrevocable and revocable trusts and the benefits and drawbacks of each.
        • Consider specific tools when giving to charities. There is a variety of vehicles to donate assets (in the form of cash or property) to a charity, each with its own advantages. For example, with a charitable remainder trusts (CRT), a beneficiary can benefit from the asset first before the remainder interest is passed to the charity. A reputable estate attorney who specializes in the ins and outs of charitable giving can help you make the right decision for your circumstances.
        • Introduce your beneficiaries to your Financial Advisor. Your Financial Advisor has an important role to play in maintaining your legacy. For starters, they have the clearest understanding of your current financial situation and can serve as a primary point of contact for your beneficiaries even before the inheritance is passed. But beyond that, they can educate your beneficiaries on the importance of financial planning, investment strategy and saving techniques, among other things. Then once the wealth has passed to the heirs, their own circumstances can be taken into account and planned for. This is one of the most important tools to combat frivolous spending: While the assets will belong to your heirs, a good Financial Advisor will be able to provide them with objective advice for their own families.

Transferring wealth in a way that maximizes the benefit for everyone involved can be complicated, and if done poorly, can result in lost wealth and broken families. For nearly 30 years, Baird Retirement Management has been helping families navigate the personal and financial obstacles to successful wealth transfer. Whether it’s setting up a wealth transfer plan, facilitating a family conversation or coordinating your wealth transfer plans with your outside tax and legal counsel, Baird Retirement Management can be an integral part to making your wealth last.

Robert W. Baird & Co. Incorporated does not offer tax or legal advice, but our Financial Advisors regularly work with clients' attorneys and tax professionals to help ensure that all phases of wealth management are addressed.


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