5 Steps for Transferring Wealth

Formulating a wealth transfer strategy can seem like a daunting task. Rely on the experts to know where and how to start. Philip Malakoff, senior vice president of wealth management at First Long Island Investors, LLC, shared five steps to get the ball rolling on a successful financial future.

Related Content: Top Tips for Transferring Wealth

Ask yourself the important questions

Figuring out when to begin the process of transferring wealth is the critical—and often most difficult—decision. Malakoff advises clients to ask themselves two questions: 1. Do you want to grow your net worth or that of your children? 2. If you were to give away some wealth, would it negatively impact your lifestyle? “Clients should give this careful consideration,” Malakoff said. “We’ve seen instances where parents gave away too much, too soon. Now their children are in better financial condition than they are.”

Get organized

Once a strategy has begun to formulate, you must be able to provide, as Malakoff described, a “complete picture of your wealth” where all financial paperwork is in order. “This can be done with a net worth statement, tax returns, schedule of life insurance or, for our clients, we would utilize our Financial SourceBook, which is a detailed compilation of all of their financial information in one consolidated document.”

Find a good team

Financial plans are mazes of numbers, legalities, rules and regulations. Creating a team of experts uniquely experienced in each of these disciplines is key. “The most effective and enduring wealth transfer strategies are put in place when the client, estate planning attorney and wealth manager all work together. The estate attorney is critical to drafting the documents and the wealth manager understands the client’s overall financial situation…An accountant could be required in complex situations to provide input on the tax ramifications.”

Avoid mistakes

This team can also help circumvent common pitfalls that leave estates in disarray, like not creating a will, something only 54 percent of Americans have prepared, according to Malakoff. Another common mistake is not taking advantage of exemptions. “Exemptions exist at the federal and state level. Seek the advice of local counsel and make sure you regularly revisit your strategy, especially if you move to a different state.”

Educate others

Once you’ve created a strategy to pass assets to the next generation, it is important your acumen goes with it. “If you are going to be transferring significant wealth to your children…it is critical to educate them on the responsibilities that come with having significant assets as well as the best practices for managing those assets for long-term growth.”