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How to Build a Succession Plan for Your Wealth


Creating a succession plan for your wealth can lead to a smooth transfer of assets to future generations. Wealth succession planning involves detailed strategies that outline how your wealth will be managed and distributed, minimizing potential conflicts and maximizing the value passed on to heirs. By proactively addressing these elements, you can secure your family’s financial future and provide peace of mind.

A financial advisor with estate planning expertise can help you navigate what can be the complicated process of succession planning. Find a fiduciary financial advisor today.

Understanding Wealth Succession Planning

Wealth succession planning focuses on the smooth transition of wealth and control of assets from one generation to the next. This type of planning is particularly relevant for individuals with significant family-owned businesses or complex investment portfolios.

The goal is to ensure the continuity of the family’s financial legacy, minimize tax liabilities and avoid potential conflicts among heirs.

Wealth succession planning may encompass a combination of the following:

  • Family governance: Establishing clear rules and structures for decision-making within the family, often through family councils or constitutions.
  • Business continuity planning: This can help family businesses continue to operate smoothly after the current owner’s retirement or death. The plan may include training the next generation of leaders and setting up management structures.
  • Tax optimization: Implementing strategies to minimize estate taxes and other transfer costs. This often involves trusts, gifting strategies and charitable giving.
  • Asset protection: Safeguarding family assets from potential threats, such as creditors, lawsuits or divorces.
  • Philanthropy: Integrating charitable goals into the wealth transfer process to create a lasting legacy of giving.

Steps to Build an Effective Succession Plan

Succession planning involves preparing for the seamless transition of leadership within an organization.

While every wealth succession plan is different, following these eight steps can help you create a robust succession plan that aims to protects your wealth and honor your legacy:

1. Assess Your Assets

Begin by taking stock of your assets, including real estate, investments, businesses and personal belongings. This inventory will serve as the foundation of your succession plan. Make sure you have a comprehensive understanding of the value and nature of each asset.

2. Define Your Goals

Consider what you want to achieve with your succession plan. Do you want to provide for your spouse, distribute a specific asset to your children, or support a charitable cause? Clear goals will guide the structure of your plan.

3. Assemble Your Team

Gather a team of professionals including financial advisors, lawyers and tax experts. Their combined expertise will help create a comprehensive and legally sound plan.

4. Choose Your Heirs

Identify who will inherit your assets. This might include family members, friends or charitable organizations. Be explicit in your choices to avoid ambiguity and potential disputes.

5. Draft Legal Documents

Work with an estate planning attorney to draft the necessary legal documents, such as wills, trusts and powers of attorney. These documents formalize your wishes and provide legal backing for their implementation

6. Address Business Succession

If you own a business, a detailed succession plan is crucial. Decide who will take over the business, whether it’s a family member, partner or an external party. Consider setting up a buy-sell agreement to help make the transition easier.

7. Plan for Taxes

Estate taxes can significantly impact the value of your assets transferred to heirs. This is where having financial experts in your corner can help. Explore strategies to minimize the tax burden, such as gifting during your lifetime or setting up tax-efficient trusts.

8. Regularly Update Your Plan

Life changes, and so should your wealth succession plan. Review and update your plan regularly, especially after major life events like marriage, divorce, the birth of a child, or significant changes in your financial situation.

Wealth Succession Planning vs. Estate Planning

While wealth succession planning focuses on the seamless transfer of family wealth and business interests across generations, estate planning can help manage and distribute an individual’s assets according to their wishes.

To that end, wealth succession planning and estate planning typically have different time horizons. While the latter takes a long-term view and looks to preserve wealth for future generations, estate planning generally has a more immediate focus, addressing the individual’s lifetime and the immediate aftermath of their death.

Both processes also typically rely on different tools, documents and strategies for achieving their goals. Wealth succession planning may use sophisticated tools like family limited partnerships, dynasty trusts and buy-sell agreements. An estate plan, on the other hand, typically includes a combination of the following:

  • Wills and trusts: Drafting legal documents that specify how assets should be distributed. Trusts can provide more control over the timing and manner of distributions.
  • Power of attorney: Appointing someone to make financial and medical decisions on your behalf if you become incapacitated.
  • Healthcare directives: Setting out your preferences for medical treatment in the event you cannot communicate them yourself.
  • Beneficiary designations: Make sure that assets like life insurance policies and retirement accounts go directly to the intended beneficiaries.
  • Probate avoidance: Structuring the estate to avoid the lengthy and costly probate process.

However, there are numerous areas where wealth succession planning and estate planning overlap and mirror each other. Both aim to protect assets from unnecessary taxation, legal disputes and other risks. They also both clearly outline how assets should be distributed. Lastly, both types of planning are highly individualized and tailored to the specific needs and goals of the person and their family.

Common Mistakes to Avoid

A woman meets with an estate planner to work on her succession plan.

Several pitfalls can undermine even the best-laid plans. Addressing these mistakes proactively can enhance the effectiveness of wealth succession planning:

  • Lack of a clear plan: Many families fail to outline a detailed succession plan, leading to confusion and disputes. A comprehensive plan helps avoid ambiguity.
  • Ignoring tax implications: Not accounting for estate taxes can result in significant financial burdens. Effective planning includes strategies to minimize tax liabilities.
  • Failure to communicate: Lack of open communication with heirs can cause misunderstandings and conflicts. Regular discussions can help everyone understand the plan.
  • Not updating the plan: Life changes such as births, deaths, or divorces necessitate updates to the succession plan. Regular reviews keep the plan relevant and effective.
  • Overlooking contingency plans: Without backup plans for unexpected events, the primary succession plan may fail. Including contingencies will help to maintain continuity.

Bottom Line

Building a wealth succession plan is a proactive step toward securing your legacy and the financial well-being of your heirs. By taking the time to assess your assets, define your goals and implement the necessary legal and financial structures, you can create a plan that honors your wishes and protects your wealth for future generations.

Tips for Transferring Wealth

  • If a family’s estate plan will see real estate pass to beneficiaries, exploring ways to avoid capital gains taxes when those properties are sold can have an outsize effect on preserving wealth. To minimize or avoid paying taxes on inherited real estate, consider three options: sell the property immediately after inheriting it, move in and make it your primary residence to potentially exclude capital gains after two years, or rent out the property instead of selling it.
  • A financial advisor with estate planning expertise can be a valuable resource as you decide what will happen to your assets and property when you die. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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