Estate Planning with a Purpose – Why, Who and How
Whether you work with a financial advisor or not, almost everyone will need to consider the concept of estate planning at some point in their lives, and generally, it is better to do so sooner rather than later. Estate planning encompasses a variety of financial and personal choices that require a person to consider his or her wishes regarding assets, taxes, health, family and trusted people. An informed approach to planning for life transitions, titling of property and wealth transfer can provide peace of mind and ensure that your beneficiaries understand your wishes.
To begin, it is necessary to know some of the legal documents required as well as the professionals you’ll need to consult. While this may sound daunting, the process can be relatively simple with the proper assistance. The table below illustrates some of the more common estate planning documents utilized along with the relevant parties:
| Document | Purpose | Recommended Professional/s | Related Party |
|---|---|---|---|
| Last Will and Testament | Record the desired distribution of your assets, provide care for dependent survivors and appoint an Executor and Guardian | Primary: Estate Planning Attorney | Executor – The designated person who will oversee the disposition of your estate Guardian – responsible for the care of minor children and those with special needs |
| Financial/Durable Power of Attorney | To grant a trusted person the power to manage your financial affairs. Durable POA remains valid if you become incapacitated | Primary: Estate Planning Attorney Secondary: Financial Advisor | Power of Attorney – ‘POA’ or ‘agent’ is appointed in writing to manage financial and business decisions |
| Medical Power of Attorney/Health Care Proxy | To grant a trusted person the power to make health care decisions on your behalf if you become incapacitated. It allows for more specificity than a living will | Primary: Estate Planning Attorney Secondary: Financial Advisor | Power of Attorney – ‘POA’ or ‘agent’ is appointed in writing to manage health care decisions. |
| Living Will | Records your wishes regarding life-sustaining health care should the need arise | Primary: Estate Planning Attorney Secondary: Financial Advisor | Medical Power of Attorney |
| Trust | Legal entity that holds and manages assets on behalf of its beneficiaries | Primary: Estate Planning Attorney Secondary: Financial Advisor | Trustee – person or institution responsible for implementing the provisions of a trust as recorded in the trust document |
Titling of Assets and Beneficiary Designations
Having a will, or trust, is necessary to allow for a smooth distribution of assets and nomination of trusted people. All the assets and appointments included in a will are subject to probate and public scrutiny. If the estate of a decedent holds assets that are not recorded in a will, trust, or other valid designation, they will likely be distributed at the discretion of a judge through the probate process. Assets that are held by a trust are not included in probate and will be distributed to beneficiaries in accordance with the trust. It is important to know that certain assets can be assigned to beneficiaries without having to be included in a will or trust. For example, a property owned by two spouses as joint tenants with right of survivorship, or tenants by entirety, will automatically go to the surviving spouse after the first death by operation of law. Assets with beneficiary or TOD designation forms like bank, investment and retirement accounts, life insurance, and annuities will pass directly to the beneficiaries. It is critical to make sure that there are no inconsistencies in your estate planning documents and beneficiary designation accounts.
Wealth Transfer
In thinking about how you might wish to provide financial benefits to your heirs, it is worth knowing that this can be done both while you are still alive and after your passing. If you believe that your estate may be subject to federal or state estate tax, you can reduce the burden by utilizing the annual gifting allowance of $18,000 per person or $36,000 for a married couple (2024 limits) as a first step. This may not sound like a lot depending on your level of wealth, but there is no limit on the number of people you can gift to, so it can really add up. Another effective gifting strategy can be achieved by ‘superfunding’ a 529 education plan, which allows for 5 years’ worth of gifting in a single year. If a grandparent pursues this strategy and is the primary account holder, the value of the 529 will no longer reduce the beneficiary’s eligibility for financial aid as of the 2024-25 award year due to revised FAFSA rules.
For those that prefer to focus on post-death transfer, there are several strategies to consider. If you are past retirement and still have a life insurance policy, you can choose to keep the policy active and name your heirs as the beneficiaries. The income or proceeds paid to beneficiaries are usually non-taxable. If you hold a taxable investment account with significant capital gains yet to be realized, you could avoid selling with the intention of leaving the holdings to your heirs, who will then receive a stepped-up cost basis upon your passing. If you hold a Roth IRA, beneficiaries will not be taxed on the distributions.
Remember that any property you own or have an interest in is part of your estate. To ensure that your estate plan is properly executed and truly reflective of your wishes, it is important to engage professionals that have the requisite knowledge of estate planning laws to avoid unintended outcomes and maximize efficiency.
At Wolf Group Capital Advisors, we take pride in addressing our clients’ estate planning needs with personalized care and strategic insight. We work closely with trusted estate planning attorneys to ensure seamless coordination and expert guidance, aligning your unique goals with tailored solutions. By integrating financial planning experience with legal counsel, we help protect your legacy and provide peace of mind for you and your loved ones.
Sincerely,
Financial Advisor
About Wolf Group Capital Advisors
At Wolf Group Capital Advisors, a comprehensive wealth management firm and Registered Investment Advisor (RIA) based in the Washington, D.C. metropolitan area, nothing is more important than the fiduciary responsibility we have in managing your wealth. Taking the utmost care, we focus on providing advice tailored to your specific circumstances. With more than two decades advising U.S. expatriates and non-US citizens employed by international organizations, we are qualified in investment strategies addressing global issues. Empathy and curiosity—combined with our experience in life planning and investment management—enable you to explore a wider set of possibilities that can lead to a fulfilling life you’ve worked hard to attain.
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