13 Critical Wealth Management Issues.
Investments may be the single biggest issue for wealthy individuals. If this were not the case a few years ago, it is now. Recent events have caused many people to rethink their investment plans; and have even changed the basic philosophy for many people.
Insurance is a unique financial tool. In addition to allowing protection of assets from loss or damage, it can also be used to solve both personal and business financial problems. For example, life insurance alone can be used for liquidity for taxes, funds to transfer a business, replacement of a charitable gift, reduction of debt, and equalization of inheritances
Liabilities As liabilities increase or decrease other components of the wealth management plan may need to be adjusted.
Qualified retirement plan/IRA With life expectancies increasing and some individuals wanting to retire early, the need for a sound retirement plan is crucial.
Stock options - employer granted qualified and non-qualified stock options. Issues to examine for qualified incentive stock options are the timing of the exercise of the option and the resulting taxation. Issues to review for non-qualified stock options are transferability, exercise plan, and diversification.
Transferring the ownership of a business is time consuming, complex, and often emotional for the party that is exiting the business. There are at least two options for a business owner; to transfer to children/descendants or to sell the business to employees or a third party entity. Both of these options are available to business owners during their lives or after their deaths. The timing of the transfer or sale, and the resulting transfer tax or income tax issues, need to be addressed in each business owner's wealth management plan.
Durable Power of Attorney Planning for incapacity is a crucial component of any wealth management plan. Most people would prefer to choose someone to act on their behalf, rather than have that person appointed for them by a court.
Gifting to children and descendants to provide an education plan or to create a pool of funds to control the assets and to reduce a taxable estate.
Charitable gifting is of great importance to many wealthy people. It is important to address tax efficiency and control issues. Highly appreciated assets may be utilized to fund a gift to a charity and to maximize tax efficiency. Donor Advised Funds or Private Family Foundations can be utilized to make distributions to charities, to maximize current tax savings, and retain control for one's family to select causes to be benefited in the future.
Titling of assets done incorrectly could prevent the use of trusts that could provide significant tax benefits. As such, an inventory of account titles matched against transfer plans both during life and at death is important.
Executor Death is something that many people are uncomfortable talking about, but in the case of wealth management, the inevitable must be addressed. One of the most important decisions a person must make is who to name as executor under their will or Successor Trustee under a Revocable Living Trust. Designating this position should ensure continuity in the investment process and the utilization of advisors the decedent used during life.
Distributing wealth to a spouse, to children or descendants, or to charity either outright or through a trust that allows the decedent to maintain some level of control and minimize estate taxes. Maximizing after-tax benefits for your heirs and other beneficiaries is best planned in advance. There are various solutions that can be implemented based on your desires.
Charitable donations at death - When making charitable donations at death, one needs to examine the most tax-efficient source from which to transfer to charity (e.g., IRA designated beneficiary). In addition, decisions must be made between direct contributions to charity versus the establishment of a pool of funds to be kept intact (private family foundation, charitable trust) where children/descendants may be named as directors to select the causes each year to benefit from this pool of funds. This allows the decedent to leave a value legacy to children/descendants, not just a personal legacy.