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Wealth Transfer Strategies
Wealth Transfer Is a Major Goal of Estate Planning
You have a variety of estate planning and wealth transfer tools that can help you distribute your assets to your family and other beneficiaries. The wealth transfer tools discussed below may also help you meet other estate planning goals, such as avoiding probate and reducing estate taxes:• Wills
• Gifting
• Trusts
Learn how your Financial Advisor can help you plan your wealth transfer strategy.
Wills: Distributing Assets to Beneficiaries
Wills are simply plans for distributing assets to family members and other beneficiaries. If you die without a will, your state law will determine how your assets are distributed. Although wills do not help avoid probate (in fact, to be effective, your will must be filed in probate court), they're still an important part of estate planning. You can work with your attorney to create (and revise) your will to meet your goals, including naming the executor of your will and, if you have children, designating a guardian for them.Beneficiary Designations
Annuities, life insurance, IRAs and retirement plans are just some of the assets that let you designate beneficiaries as part of the paperwork process. When you designate a beneficiary, the assets are automatically distributed to that beneficiary upon your death, which means they generally avoid the probate process. Note: Beneficiary designations take precedence over any other instructions you provide in a will or trust. Keep that in mind when you're developing your estate plan.Gifting to Individuals & Trusts
In its simplest form, gifting presents an opportunity to transfer assets to children or other beneficiaries during your lifetime and reduce your taxable estate. Sophisticated gifting techniques can also help you:• Provide income for yourself or your heirs
• Avoid capital gains tax on your appreciated assets
• Leverage your annual exclusion gifts
• Pay for a child's education
Annual gifting. You may gift up to $12,000 per person per year tax free ($24,000 per recipient for married couples who combine gifts). This amount is called the annual exclusion. Any gift over that amount may be subject to gift taxes.
• Medical and education expenses. If you pay someone's medical or education expenses directly to the provider, the gift is not included in your annual exclusion amount. For example, if you pay $25,000 for your grandchild's tuition in 2008, you can still gift up to $12,000 tax free to him or her this year ($24,000 for a combined gift from you and your spouse).
• Gifting to 529 college savings plans. If you're helping your child or grandchild save for college using a 529 college savings plan, you can gift up to the annual exclusion per year tax free or you can make up to five years' worth of annual exclusion gifts ($60,000 per single donor; $120,000 per couple) in one year to benefit any one person.
Note: If you contribute the maximum amount using the five-year acceleration rule, you will not be able to make other annual exclusion gifts to that beneficiary for five years. And if you die within five years of the date of your gift, a portion of the original gift will be included in your estate tax calculation (any growth will not be included).
Trusts: Transfer Wealth, Avoid Probate & Reduce Estate Taxes
Many types of trusts can help you accomplish your estate planning goals; below are two common types of trusts designed to help you transfer your wealth efficiently while avoiding probate and reducing estate taxes:• Life insurance trusts. An irrevocable life insurance trust lets you keep the death benefit of your life insurance policy outside of your estate (and out of probate), which means your life insurance proceeds will not increase your estate tax liability. In fact, you can design your life insurance trust so that it will be applied toward your estate tax liability, leaving more of your actual wealth for your heirs.
• Revocable living trusts. Although revocable living trusts are still part of your taxable estate, they do help you efficiently transfer wealth to your heirs and help them avoid the probate process.
Learn more about using trusts in your estate planning strategy.
How Your Financial Advisor Can Help
Establishing wills, gifting to beneficiaries and establishing trusts require the help of your attorney and qualified tax advisor. Your Financial Advisor can work closely with you to provide the information they need to meet your goals. In addition, he or she can work with the professionals at A.G. Edwards Trust Company,* to provide trust services to meet your needs. Note: A.G. Edwards does not provide legal, accounting or tax-preparation advice. You should consult your tax and legal advisors for your specific situation.
*A subsidiary of Wachovia Corporation and an affiliate of A.G. Edwards
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