Managing Your Family’s Wealth

A picture of a rich man, smoking a cigar and carrying a bag with a dollar sign.Managing your family’s wealth is by no means easy.  According to Gallup, in 2015, 60% of Americans are “moderately” or “very” worried about not having enough money for retirement.  In addition to retirement, managing family wealth effectively is critical for saving for your children’s education as well.  To accomplish this, one needs to carefully create and stick to a family wealth management plan.

Don’t Be Like Prince

With the recent passing of Prince, one bit of news that has come out about the musician is that he had no end of life planning in place.  If you want your children to be taken care of, or want to guarantee that your assets will be passed along to your heirs according to your wishes, you’ll want to have a good estate plan.  At a minimum, you’ll need to create a will, and depending on your situation, you may want to create a trust for your heirs as well.

One item to note is that 401(k)s and IRAs will pay out to the beneficiary listed on the plan – a will does not override this.  If you’ve had any changes in your family, such as divorce, make sure you update your 401(k) beneficiary!

Also, life insurance can be beneficial as well.  The right coverage can provide the liquidity needed to repay debts, support your children and other dependents, and pay estate taxes.

Retirement vs Children’s Education

One of the biggest challenges a family can face is planning for retirement while simultaneously planning for your children’s education.  Don’t be tempted to sacrifice saving for your retirement to finance your child’s education – options such as scholarships, grants, loans, and work-study can reduce the education burden, and there are other options out there that may help further, such as 529 plans and Education Savings Accounts (ESAs).

Giving the Gift that Keeps on Giving

Depending on how it’s done, giving money, investments, or other assets to your children or other family members can save future income tax and be a sound estate planning strategy as well.  Currently, you may give $14,000 per year, per individual, or $28,000 if you’re married, without incurring the gift tax or using your lifetime gift tax exemption.  If you have numerous children or grandchildren, this can add up.  Also, by gifting assets that produce income or are expected to appreciate, you not only remove assets from your taxable estate, but also shift income and future appreciation to people who may be in lower tax brackets.

Trusts are another method to gift assets to your children.  Not only will a trust help ensure the funds are used in the manner you intended, but they can protect the assets from creditors.

Being Charitable

Properly made gifts can avoid gift and estate taxes, and possibly give an income tax deduction.  Charitable trusts, for example, have many potential advantages, including preserving the value of highly appreciated assets, reducing gift taxes owed, and reducing estate taxes.

Additional tax tip:  If you’re 70 ½ or older, you may find it advantageous to roll over your IRA Required Minimum Distribution (RMD) to a charitable organization.  You are allowed to contribute up to $100,000 per year from an IRA to a qualifying charity without recognizing it as income.  This may be of benefit to taxpayers who itemize deductions and whose charitable contributions are reduced by the percentage of income limitation – rather than having to recognize the entire amount as income and receiving a smaller deduction, the new rules allow you to exclude the entire amount from income (although you don’t receive any deduction – that would be a double benefit!).

Scroll to Top