Outlining the top ten rules for wealth transfer

l Have a basic inheritance plan in place, no matter what your net worth is. The most basic plan includes a will, an assignment of power of attorney and a living will, also known as a medical power of attorney. For those with young children, this is especially important as a will is the best way to appoint guardianship of minors.

l Make a list of all your assets, including investment, retirement savings, insurance policies, real estate properties and business interests.

l Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want to handle your financial affairs if you are incapacitated? Whom do you want to make medical decisions for you if you become unable to make them yourself?

l Once you have decided what kinds of giving you wish to make, discuss your plans with your heirs. The more you outline your intentions to them, the less the chance for disagreements when you are gone. In actuality, this is the hardest one to execute, so it is often left undone.

l Besides a will, a trust can be considered and it is not just for wealthy individuals. A trust is a legal mechanism that lets you put conditions on how your assets are distributed after you pass away. It also allows you to reduce your estate and gift taxes, as well as cost, delay and publicity of probate court – the court that administers wills.

l A trust makes sense for you if you have net worth of at least US$1 million, you have assets invested offshore, you want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your passing, for example, to pay upon certain conditions such as reaching a certain age or graduating from college, and you want to support your surviving spouse, but also want to ensure that the principal or remainder of your estate goes to your chosen heirs, that is, your specific child or children after your spouse passes away. Trusts are flexible, varied and can be complex, so you should discuss and consider carefully with experts before setting it up.

l A living will is very important. It makes your medical wishes known and can save a lot of issues and heartache down the road for you and your family. A living will is a statement of your wishes for the kind of life-sustaining medical intervention you want or do not want in the event that you become terminally ill and unable to communicate properly. 

l The wealth transfer process, documentation and mechanism especially trusts can be complex, and are something you need to get right as there is no second chance. Seek help and advice from experts such as financial planners, lawyers and accountants. This is not the time for do-it-yourself.

l Even more important than the documents and mechanism such as a will or trust to achieve effective wealth transfer is preparation of the next generation with essential wealth management knowledge and fundamentals in order to achieve responsible wealth management, wealth preservation and hopefully growth. The common expression that wealth does not last more than three generations is not only a saying, but often true with plenty of examples to be cited. Besides what all good parents plan and provide for in good education and work opportunities in good companies, it is imperative to help connect a healthy work ethic to its material rewards so that the next generation learns to value, preserve and grow the estate. Such a work ethic does not form overnight and cannot be taught when older, so it is important to start early in life with the young ones.

l With all the documents, mechanism and next generation wealth training in place, especially the knowledge and confidence in your heirs to be in a good position to receive great wealth, do not forget to enjoy life and live life to the fullest.

 

Vira-anong C Phutrakul is Managing director of retail banking at Citibank.