Transferring Wealth: After Death and During Life

December 15, 2010
Setu Mazumdar, MD

In recent weeks, we've talked about the three major areas of financial planning: goal-setting, asset protection and building wealth. This week, we'll cover the fourth: Wealth transfer, the efficient redistribution of your wealth after death and during your life. That's right, I said, "During your life." Wealth transfer involves a whole lot more more than simply creating a will.

Getting your financial house in order is an organized process just like seeing and treating patients. Let’s summarize what I’ve been discussing over the past few weeks:

1. Forget investment products. Your goals are the primary driver of the rest of your financial life. (Read more here.)

2. Before you focus on investments, protect what you already have. (Read more here.)

3. After you’ve secured your assets, only then can you focus on building them further. (Read more here.)

And that brings me to the final major portion of your financial life that needs to be addressed in order to have a unified wealth-management plan: Wealth transfer, the efficient redistribution of your wealth during life and after death.

Notice that most people think of transferring their wealth only after death, but that’s just one area of financial planning. Wealth transfer can be broken down into three segments: estate planning, gifting, and education planning.

Let’s take a look at the relevant questions you need to answer to have an effective wealth-transfer strategy:

1. When was the last time I reviewed my will with an estate-planning attorney?

2. Do I even have a will? (I know numerous physicians who don’t have a will. If you don’t have one, draft one … NOW!)

3. Who are the executors, trustees, and beneficiaries in my will and are they still appropriate?

4. Have I named successor executors and trustees in my will?

5. Are provisions in place for minor children, such as naming guardians?

6. Have I titled my assets to minimize the chance of being subject to probate after I die?

7. Have I titled my assets to minimize the effect of estate taxes?

8. Will I or my spouse be subject to estate tax?

9. Are the beneficiary designations on my life-insurance policies as I wish? Do I have secondary beneficiaries?

10. Do I have a durable power of attorney, a living will, and a power of attorney for health care?

11. Do I need to buy permanent life insurance for liquidity purposes upon my death?

12. Do I need to start a gifting program during life to remove assets from my estate?

13. Am I giving to charity in the most income tax and estate-tax efficient way?

14. Do I have provisions in my will to give my wealth to my favorite charities (for philanthropic reasons and for estate-tax reasons)?

15. What types of trusts do I need to set up during life and after death for estate tax minimization, asset protection, and for appropriate distribution of my wealth?

16. What types of college-funding vehicles are most tax-efficient and how much do I need to save for my children’s education to meet their college funding requirements?

That rounds out a good list of questions that you need to address to get your entire financial life and wealth-management plan in order -- from wealth protection to wealth enhancement and, ultimately, to wealth transfer.

But, as they say, that’s just the beginning. Now it’s time to start implementing strategies to meet your goals. And that’s what I’m going to help you with from here on.

Your financial prescription: Address wealth transfer after death and during life.