Pershing
Wealth Transfer—An Essential Part of Your Client's Financial Strategy
Issue 14, 2010
Delivering holistic wealth management services goes beyond servicing your clients—it includes helping them build a comprehensive plan for today, tomorrow and realizing their desired legacy. Wealth transfer is about more than just passing on assets. More fundamentally for clients, it involves understanding what is important to them, what their deepest values are, and how they want their wealth to benefit others—both friends and family, as well as philanthropic organizations.
The following are strategies your clients may consider in developing a wealth transfer plan:
Gifting
Clients, of course, can start transferring their wealth while they’re still alive through appropriate gifting mechanisms that may reduce their tax liabilities. Some of these include:
- 529 College Saving Plans
Clients can receive five years’ worth of annual tax exclusion gifts in the first year of that time period. However, additional gifts made during that same time period will be subject to the gift tax. - Lifetime Gift Tax Exclusion
Using the federal gift tax credit, clients can lower their tax liability by gifting a predetermined amount of money during their lifetime. - Unlimited Marital Deduction
It allows for unlimited estate tax deductions for a surviving spouse as long as both husband and wife are U.S. citizens. - Direct Tuition and Medical Payments
Clients can help even a non-relative with education or medical expenses without incurring gift taxes.
Trust
With the right trust solutions, clients can manage their assets without disruption in the event of their death or disability and pass their holdings efficiently to loved ones and favorite charities. Specifically, trusts can help clients address a wide range of situations, from paying for their children’s or grandchildren’s education and ensuring that special needs children are properly cared for throughout their lifetimes to supporting a charitable cause or even involving family members in philanthropy.
Some tax-efficient strategies include:
- Revocable Living Trusts These can be established to provide management of assets in the event of a death or disability and, avoid probate on the transfer of assets.
- Testamentary Trusts
They’re particularly useful for transferring assets in a responsible way to minor children after the client’s death. They can be used for a variety of needs such as financing education, supporting beneficiaries’ lifestyles and making charitable gifts. - Irrevocable Life Insurance Trusts
They provide a tax-efficient way for beneficiaries to receive the proceeds of a life insurance policy. - Charitable Remainder Trusts
Under these arrangements, property or money can be donated to a charity. But the donor can continue to use the asset or receive income from it while still living. - Special Needs Trusts
They provide funds to disabled individuals in a way that does not affect their access to governmental rehabilitation or support programs.
Life Insurance
Clients can use this to help maintain beneficiaries’ lifestyles or provide liquidity for paying estate taxes. And they can do more than preserve wealth, they can actually increase the amount passed onto a recipient, and do so in a tax-efficient way. For example, a death benefit from a policy is passed tax free to a beneficiary. Because those funds can count towards the gross value of an estate, however, it’s best to ensure the policy is part of an irrevocable life insurance trust.
Ultimately, by recommending suitable wealth-transfer strategies for your clients based on an in-depth analysis of their desires, you’ll help to create efficient ways to pass their assets to loved ones and favorite charities. More than that, you’ll strengthen your relationship with your clients and beneficiaries—and their trust in you.
For Professional Use Only.
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