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Simple tips for transferring wealth.

Transferring your wealth to the next generation can feel as daunting as building it. But with some planning and communication now, you can help ease the stress and uncertainty that can come with wealth transference.

As a follow-up to your estate plan, a wealth transference plan is useful for ensuring a smooth transition of your assets to your loved ones. Chris Ward, senior vice president and financial advisor at Commerce Brokerage Services, Inc.1 , encourages families to open lines of communication when creating a wealth transfer strategy. “Getting organized now, and communicating your plans to beneficiaries, makes for a smoother and more efficient wealth transfer,” he explains. “A well-planned strategy can create instructions to relatives, facilitate legal proceedings and even provide income replacement.”

For most families, the biggest challenge after communication is lack of knowledge, explains Ward. The tips below can help you gain valuable insights so you can successfully transfer your wealth to the next generation, while making sure your individual wishes are carried out according to plan.

Get started with these four tips.

  1. Review your goals.
    Go over your retirement plan, personal needs and sources of income. Make sure you have enough money set aside to take care of yourself, including healthcare expenses, before considering transferring assets to others. Ward says in addition to considering your health, pay attention to your time horizon, family history of longevity and overall net worth as you plan for a successful and seamless wealth transfer.

  2. Determine how your assets will be distributed.
    Take an inventory of your assets and liabilities, and decide what you will give to loved ones and/or philanthropic organizations. Prepare legal documents to clearly define your wishes and help preempt disputes or questions later.

  3. Communicate frequently.
    Sit down and discuss your plans with family members. The sooner your family members know about your plans, and the responsibility that comes with any assets they’ll receive, the easier it will be to distribute your estate. By communicating early on, you can help set expectations and make your wishes clear. Consider asking a trusted financial advisor to facilitate discussions since they can provide an objective third-party perspective.

  4. Document your plan and stay organized.
    Review your plans and documents on an annual basis, or as life events like marriage or a cross-country move occur. Keep your documents updated . Review your primary and secondary beneficiaries, and make sure key people are aware of their responsibilities and know where to locate important documents.

Wealth transfer strategies for minimizing taxes.

  • Gifting is one of the easiest ways to transfer wealth to heirs, as well as favorite charities. Current IRS guidelines allow gifting of up to $14,000 per year to as many people as you wish, free of gift taxes. Married couples can gift up to $28,000 per year.

  • Life insurance policies not only provide tax-free benefits to your beneficiaries, but may also cover any estate taxes. Consider reviewing your policies with your financial advisor who can explain your options.

  • Trusts allow you to control distributions from your estate while also minimizing wealth transfer tax liability. Depending on your goals, there are several types of trusts that serve different purposes. Most trusts are set up to help you prevent legal issues and challenges to your estate. Certain types of trusts allow you to make changes or updates to your plans at any time.

Stay in control of your financial legacy. 
By planning now and keeping the lines of communication open, you can ensure a simple and successful wealth transfer to the next generation. Review your wealth transfer plan periodically to ensure that it aligns with your personal values, needs and financial objectives. And consider discussing your wealth transfer options with an experienced financial advisor who can help ensure that your wishes — and financial legacy — are carried out according to plan.

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1 Commerce Brokerage Services, Inc., Member FINRA and SIPC, is a wholly owned subsidiary of Commerce Bank.

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