Creating an estate plan for your wealth

It’s important that your estate planning supports your legacy goals.

People can get so caught up in their daily work and lives that they don’t take the time to plan for what will come after they’re gone. Wealthy families in particular may delay estate planning either because they’re concerned that making changes now will mean losing control of their estates, or they worry about their money’s effect on their heirs.

But this very reluctance can lead to problems. One example I experienced was of parents who got stuck on the question of how to divide their wealth among their children, one of whom had a substance abuse problem. They didn’t know how to treat all of their children fairly without enabling the one child’s issues.

The longer the parents waited, the greater their risk grew of dying without having a responsible plan in place. If you don’t have a Will or other elements of an estate plan, the laws of your state of residence may decide for you where your assets will go. Even with a Will, your bequests can get stuck in probate and be subjected to public disclosure.

Lack of clarity about estate planning may affect family relationships, as heirs and other potential beneficiaries spar over inheritances and control of the family legacy. According to a survey conducted by TD Wealth, 46% of respondents identified family conflict as the biggest threat to estate planning in 2019. Nearly a third cited the designation of beneficiaries as the most common reason for the conflict^¶.

Beyond the emotional fallout, such disputes can impede your wishes or even diminish the size of your estate. We all want to make sure that what we have goes to whom we want, when we want. To do that, we should be intentional in our planning.

Here are steps to consider.

1. Assess your goals

Planning for wealth transfer starts with your goals and values and any special concerns about what’s ahead. One client, a widower, was on the verge of a new marriage. He wanted to preserve an inheritance for his children from his first marriage while ensuring his new wife would be financially secure. Taking the client’s goals into account, I designed a trust that would guarantee income for the spouse during her lifetime, with the trust principal going to the children after her death.

Understanding your priorities can help you and your advisors align your estate plan with your values. This conversation will include an assessment of your own lifestyle expectations for the future to help ensure your needs are fully funded along with your estate transfer goals.

2. Create a timeline

Once you settle on a general idea of how your wealth should be distributed, the next step is to determine a timeline. Is this something you want the children to have now or when they are older? Is this generational wealth intended to benefit grandchildren and beyond?

These questions can help you decide whether to make gifts during your lifetime or to simply pass assets at death. This timeline discussion can also help frame your philanthropic goals in the context of your overall plan. Some families choose to begin distributions to charities only after a certain percentage or dollar amount of assets has gone to family members.

3. Assemble an experienced team

For wealth planning to work well, you need the right financial team. Your Huntington Private Bank^® advisor can serve as point person and work closely with other key players, who may include an estate planning attorney, a tax advisor, a family consultant, a portfolio manager, and maybe others, especially if you own a business. Your advisor can also communicate with representatives of other financial institutions to help make sure all of your assets are included in a coordinated plan and that your investment approach is diversified.

4. Emphasize communication

Communicating with your beneficiaries about what’s ahead is also a key part of the planning process. You’re preparing the heirs for the assets, not just the assets for the heirs.

How much you tell your children and other beneficiaries about your wealth and your plans for distributing it is up to you. Some parents want to limit what they share—perhaps letting the heirs know the general terms of how assets will be divided but without revealing dollar amounts. Others hold things even closer to the vest because plans may change.

The relative maturity of your intended beneficiaries may be another factor to consider, and communication involves preparing beneficiaries to handle the wealth they receive. This may include basic financial education as well as discussion of protecting assets, charitable giving, and other issues.

5. Assess your assets

Families have a variety of assets. There may be real estate in several states, multiple retirement accounts, and investment accounts.

Part of the planning process involves looking not only at what you own but also at the costs of ownership. Keeping a family cabin, for instance, may involve ongoing expenses for maintenance and taxes. Appreciated securities, meanwhile, could result in future tax liability that could be limited if those assets are passed along through your Will or given to charity. This part of the planning process can help determine which assets should fund each component of your plan.

6. Structure gifts

How your wealth transfer plan is implemented depends on your goals and needs. Many estate plans use trusts, which can help you better control how and when funds are distributed. For instance, a dynasty trust can help provide distributions to a current generation initially while preserving trust principal to benefit future generations.

This kind of trust can help protect assets from the impact of divorces and from seizure by creditors or predators. In the case of the couple agonizing over how to distribute assets to their children, I suggested a structure for distributions that used similar parameters for all of the children but added benchmarks for a child with substance abuse issues to be met before distributions.

Trusts and non-profit entities can help you meet your charitable giving goals as well as other priorities. For example, I recently worked with clients who decided to start a family foundation, not only as a vehicle for their own giving but also as a tool for passing along their philanthropic values to their children. Others create Donor-Advised Funds.

Once you have a wealth transfer plan in place that reflects your wishes, values, and assets, you’ll need to make sure the plan stays current. You should revisit your estate plan every three years or whenever there’s a significant change in your personal situation or a major change in tax laws.

With open communication, clear vision, and the knowledge provided by your Huntington Private Bank advisors, you can execute and maintain an estate plan that helps you realize your vision for your wealth and legacy. It’s never too late to start preparing for the passage of wealth, but it’s better to start as soon as possible. To learn more, please contact your Huntington Private Bank team to see how we can help, or find a Huntington Private Bank^® Office near you.