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Understanding an Estate Plan Versus a Wealth Transfer Plan

Fewer than half of adult Americans have estate planning documents. For those who die without a will or trust, their state laws determine to whom estate assets pass. This may or may not be what you want. However, if you don’t have your wishes properly documented, then you don’t get a choice, as noted by Forbes in “The Difference Between Having an Estate Plan and A Wealth Transfer Plan.”

If you don’t have estate planning documents, then your family will be exposed to unnecessary court fees, frustration and wasted time and effort. The proper estate planning documents can speed the probate process, decrease costs and help maintain harmony in the family. If you do have estate planning documents, it’s important to know the differences between these documents and a wealth transfer plan.

First, know that some families are shattered by jealousy, animosity and a lack of trust when a parent dies and the beneficiaries are made known. Heirs may think they’ve been short-changed without knowing the reasons behind the decisions the deceased made.

A big reason family wealth erodes is a lack of communication, understanding and trust among family members. Another reason is heirs who are unprepared to receive their inheritance. In addition, there can be problems with financial and tax planning and poor investing. Some heirs will take their inheritance and go on a spending spree or quit working.

A wealth transfer plan is a strategy that you undertake to prepare your heirs for their inheritance, to keep family harmony and to equip your heirs to make better decisions about what they inherit. This means communicating your money values and family goals; sharing your intentions regarding heirs or beneficiaries and time frames for transfers; introducing family members to your advisors—such as your estate planning attorney—to address their questions; giving heirs a better understanding of family assets and encouraging sound investing; talking about methods of transfer—including direct gifts, the use of trusts and the importance of philanthropy; and encouraging family members to establish their own estate plans to help them accept their inheritance.

In short, a qualified estate planning attorney can help you and your family through this important process.

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