Only 45 percent of Americans have some sort of formal estate plan. Without a will or trust, state law determines who receives an individual’s assets when he or she passes. This may mean that assets get distributed against the wishes of an individual and any beneficiaries. However, it may not be enough just to have an estate plan put together.
Instead, it may be a good idea to have a wealth transfer plan. A wealth transfer plan is a comprehensive vision for how money will be transferred to heirs and how they will use that money. This is important because 70 percent of generational wealth is typically lost in the second generation while 90 percent is lost by the third generation. One reason for this is the fact that those who receive a sudden windfall may stop working or spend the money without much thought for the future.
When creating a wealth transfer plan, it is important to consider the financial goals of the beneficiaries and the family as a whole. Beneficiaries may want to sit down with their parent or family member’s financial advisers to learn ways to make their inheritance last as long as possible. It may also be a good idea to discuss whether the money will be transferred through direct gifts or through a trust.
Taking time to engage in estate planning may reduce confusion and the possibility of a legal challenge after an individual dies. Talking to an attorney may make it possible to review current estate plan documents to ensure that they meet an individual’s needs. It may also be possible for an attorney to help draft new documents that give greater control over who may receive cash or other assets and how they may be transferred.
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