While it can be a sensitive subject, discussing wealth transfer with your parents in a timely manner is a responsible and necessary matter that should be taken very seriously. There are a number of options to consider, each one offering a different method of distributing the wealth once a person passes away. For years, the team at Parents For Purpose have worked hard to put parents and their children on the right track. Teaching children discipline and respect will help a parent as they age. Besides being responsible and handling loose ends, parents can ensure that their wants for their money are upheld. Some of the ways that you can ensure successful wealth transfer is highlighted here.
1. Ask Your Parents what they want
What will happen to your parent’s money when they are no longer in the picture? Prior to them making any decisions, consider having an advisor and peers offer advice about the situation. While tax avoidance is an important issue to consider, this is not the only objective you should have in mind.
Listening to and following the wishes your parent has when it comes to this type of wealth transfer can make things much easier for everyone involved. Putting these wishes into a legal document will help to ensure they are followed to the letter.
2. Show Responsibility
When parents have a substantial estate that will be passed on to children and grandchildren, a common concern is often ensuring the money will be used in a responsible manner. Various legal documents, such as irrevocable trusts, can be used to outline what the money should be used for, and what it should not be used for.
3. Shared Assets
If there are family members who will be sharing assets, it is important to consider the possibility of conflict that may occur. Instead of allowing beneficiaries to dictate the terms, parents can specify things including how a sale of a business or property should take place. This can eliminate the potential for disagreements down the road.
Working with a reputable and experienced lawyer is a great way to get this in writing. Once these documents are drafted they can be certified and put in a safe place.
4. Consistency is Key
Consider the needs of the beneficiaries when documents are being drafted by an attorney. Try to implement the use of guiding principles that will offer some consistency to clarify the deceased intentions if any questions may arise later on. This will provide direction for the trustee, without hurting their ability to adapt to changing situations.
5. Charitable Intentions
While charitable donations are tax-deductible, this still means a sacrifice on your part. Due to the tax benefits, there can be some financial reasons for charitable gift; however, the contributions need to be for fulfilling the charitable intentions of an individual, rather than generating tax savings.
Often times, these charitable donations will need to be laid out and described in detail in a person’s will. Failing to do this may lead to a person’s final wishes not being carried out properly.
6. Existing Trust Options
If a parent currently has trust documents established, and some of the items are not addressed fully, then having a lawyer re-work them can be helpful. Some trusts are considered “irrevocable trusts” which means that changes are not possible. However, there are some options available, which may be beneficial.
The only way to find out about the trust options you have available is by working with a lawyer. Making sure the lawyer in question has a great deal of previous experience is a must.
The most important thing for children to remember when discussing the transfer of wealth with their parents is that it is not their decision. Being responsible and treating the manner respectively can be extremely helpful in these situations. However, it is also essential that you are familiar with the various type of wealth transfer options.
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