Who Should Inherit Your Wealth? Guiding Mid-Level Managers on Charitable Giving, Estate Planning, and Family Harmony

As a financial advisor, I have witnessed the anxieties that surface when contemplating the question: "Who should inherit your wealth?" While this is undoubtedly a deeply personal decision, it is vital that you explore various avenues to ensure your assets are distributed efficiently and harmoniously. In this blog, we will delve into three topics of consideration around your financial legacy.

Charitable Giving: Your Legacy of Impact

Considering philanthropy as part of a comprehensive wealth management plan can foster a sense of fulfillment and leave a lasting legacy beyond mere monetary distributions. Charitable organizations provide an opportunity to help those less fortunate, support causes you believe in, and make a positive impact on society. Engaging with philanthropic endeavors can also have the added benefit of reducing potential estate taxes.

When attempting to decide which assets you should leave to your family and which assets to leave to the charity of your choice; there are a couple of important things to keep in mind to will help you make those decisions. Consider leaving IRA assets to your designated charity and consider leaving your non-IRA accounts to your family. Here is a reason behind that strategy:

In your IRA, you put money into  tax-deferred accounts your entire career; meaning you have not paid any taxes on those contributions. By leaving those deferred funds to a charity, they are able to gain access to the funds tax-free since non-profit organizations do not pay taxes. If you left the IRAs to your family, they would have to pay taxes according to their income when they would go to withdraw the money. 

However, non-qualified assets such as an individual or joint brokerage account are considered after tax money which means you only pay taxes on the gains in the account. So, when you die and leave those assets to family members, they receive a step-up in basis to the price of the investments from the date of your passing. This means there may only be minimal gains to pay taxes on, if there are any gains at all. 

Importance of Estate Planning and Wills:

Estate planning is often ignored until it becomes urgent. However, neglecting it can have significant repercussions for both you and your loved ones. Crafting a comprehensive estate plan is essential to ensure your assets are distributed according to your wishes while minimizing tax implications. A Will is a crucial component of this process, as it specifies how your property should be divided, designates guardians for minor children, and allows you to provide directives for end-of-life decisions.

We must stress the importance of establishing a Will early on, regardless of age or wealth. Without a Will, the state will determine the distribution of your assets, potentially leading to unintended outcomes and added distress for your loved ones.

Handling Arguments with Family Members over Inheritances:

The prospect of disputes arising amongst family members during the inheritance process can be daunting, but proactive steps can help mitigate such conflicts. First and foremost, practicing open communication and transparency about your intentions can alleviate tensions. Engage in honest conversations to manage expectations and explain the reasoning behind your decisions. In some cases, involving a mediator or family counselor may be advisable to facilitate productive discussions and promote understanding.

Consider documenting your wishes in a letter accompanying your will, offering explanations for your chosen distribution. Additionally, appointing a trusted executor to oversee the process impartially can help provide a sense of fairness and reduce familial friction. 

In my own experiences and what I encourage all my clients who are in this stage of life to do is; conduct a family gathering after all final documents have been drafted and signed and lay out everything out on the table. As this can be a difficult conversation to have, I always offer to be there with my clients and have their back when discussing with their family. As difficult as this conversation can be, it certainly goes a long way in giving people time to process your wishes, as well as greatly reducing the chances of someone contending the Will as there are no questions as to what your true intentions were. 

Deciding who should inherit your wealth is a deeply personal choice that should align with your values, goals, and desires. By incorporating charitable giving into your plan, you can create a more meaningful and impactful legacy. Estate planning and wills are crucial for ensuring your assets are distributed as intended, protecting loved ones, and minimizing tax burdens. Lastly, open and honest communication, along with professional guidance, can help navigate potential conflicts and foster family harmony during this sensitive time.

You possess the wisdom and foresight to plan for the future. By addressing these financial matters with patience and diligence, you can leave a lasting legacy that reflects your values, benefits causes close to your heart, and brings your loved ones together in harmony.

Legacy Financial Group does not offer legal or tax advice.  Please consult the appropriate professional regarding your individual circumstances.