Wealth transfer planning – one of the most important aspects of complete estate planning, and yet quite often the most overlooked. What is Wealth transfer planning? It is simply appropriately positioning certain assets to maximize their value while minimizing or eliminating taxes – for the benefit of the heirs and beneficiaries.

Historically, the concept of wealth transfer pertained to those with larger estates; those who had advisory teams to design and implement specific and sophisticated strategies for their individual needs. However, for the first time in American history, a huge percentage of today’s senior population is passing assets to the next generation; and while the majority does not have large estate issues, they do want to enjoy the same benefits and tax advantages as the wealthy. Over the past few years, new products and strategies have been developed that now allow most seniors to have these same wealth transfer opportunities.

What types of assets are positioned for wealth transfer planning? First of all, they are assets that will not be needed or used during the client’s lifetime. They are assets that have been earmarked to go to the heirs or beneficiaries. These assets are typically annuities, IRA’s, brokerage accounts, CD’s and money market accounts. Who are the heirs and beneficiaries? For married couples, the primary beneficiary is usually the surviving spouse. Within many married households, assets such as annuities and IRA’s have been set aside to supplement the income of a surviving spouse.  Unfortunately, these assets usually carry a huge tax burden along with them. In the majority of cases, these tax burdens are unnecessary to pass on to the surviving spouse or other beneficiaries. Other beneficiaries may include children, grandchildren, other relatives, church, synagogue or charities.

As stated, certain assets, particularly annuities and IRA’s, can pass on significant and unnecessary tax burdens. How many seniors knowingly feel that they have made specific plans to leave as large of a tax burden as possible on their assets and have a little money as possible go to their surviving spouse, children or grandchildren? If they leave these assets where they are now, chances are this is exactly the type of planning they have unwittingly done.

The primary vehicle historically used to transfer these assets is life insurance. Why? Because the death benefit within life insurance passes to the named beneficiaries income tax free, and if properly placed within a specific trust, estate tax free. The policies can be designed to have death benefits absolutely guaranteed for the life of the client and universal life insurance can add a very significant gain to the value of the initial asset, for the benefit of beneficiaries.

A client can take the full current value of an IRA and pass it to their surviving spouse or children income tax free, while at the same time still pocketing a minimum distribution. Or the client can add an immediate gain of 50% or higher to the value of the IRA and pass the entire amount to a surviving spouse or other beneficiary income tax free.

Any gain that is in an annuity can be taxable to the heir or beneficiary. Instead of passing on this tax burden, it is possible to instead add an immediate gain of 50% to 100% to the value of the annuity and pass that entire amount income tax free.

Many people, unfortunately, have made investments in the past few years that didn’t perform the way they expected them to. In fact, many people have lost money. It is possible to recover that loss, for the benefit of the heirs, as though that bad investment had never been made in the first place.

There is also a program within the wealth transfer arena that contains a very reasonably priced comprehensive long term care benefit – and if you don’t use it, the money you put in, plus a lot more, goes to your beneficiaries income tax free.

There are two requirements for the wealth transfer strategies:

• This must be money that the client is not going to use or need during their lifetime. Remember, these strategies are for the benefit of the beneficiaries.
• The client must be insurable.

Most seniors are insurable. High blood pressures, high cholesterol, diabetes, past heart conditions or past cancer will not generally exclude a client from being insurable. Preliminary underwriting is usually done to see what the client qualifies for.

If the client has assets that are designated to be passed on, they should seriously consider exploring a wealth transfer strategy. From $50,000 to $50 million, a good wealth transfer will properly guide your legacy to the next generation.