If making sure your family has wealth for generations is important to you, but you haven't put together an estate plan, know that you're not alone. A UBS survey of high net worth Asian investors revealed that 8 out of 10 wanted to leave an inheritance behind, but only 4 in 10 had discussed this with their family. Starting the conversation around estate planning can be hard, but it's essential for managing your wealth. Your UBS Financial Advisor can help you get started.
Below are the top takeaways that will guide our work toward a more inclusive investor experience.
Why is estate planning important?
Why is estate planning important?
Building wealth is a priority for many, and having a plan in place for passing on your money in a way that aligns with your values is an essential part of managing it. Even so, discussions around this topic are often met with discomfort. But having open conversations with family and potential heirs can provide them with the necessary tools to make the most out of their inheritances.
“Legacy planning starts with establishing some foundational documents,” says Melinda Hightower, Head of Multicultural Client Segments at UBS. “Still, those are no replacement for a dialogue about your values. Talking to your kin and beneficiaries about money can be challenging and people are usually hesitant to bring it up. That's why it's one of the most vital family conversations that happens too infrequently.”
So how do you get started?
So how do you get started?
Estate planning is an integral part of our wealth management framework (Liquidity. Longevity. Legacy.). Working with your UBS Financial Advisor to develop your framework will help you decide how much you need to fulfill your lifetime ambitions (the Liquidity and Longevity strategies), as well as identify which assets can be used for the Legacy strategy, aimed at enhancing the lives of others.
To develop your Legacy plan, first consider these questions: How much do I want to give away? What do I want my wealth to achieve—keeping in mind that I want to leave as much as possible to my loved ones and not taxes or court costs? When should I make the gifts? And how transparent should I be with my heirs?
When it comes to legacy planning, Justin Waring, Investment Strategist Americas at UBS, recommends considering how to make your gifts meaningful—noting that bigger isn't necessarily better. This is due to "diminishing marginal utility"—when it comes to a pizza, for example, the first slice will always be the best.
Next, determine the documents you’ll need to put your plan into place. Jennifer Lan, Senior Wealth Strategist from UBS Advanced Planning Group, suggests that your estate plan include a will, revocable living trust, financial durable power of attorney and medical directive—keeping in mind that states have their own laws governing these documents.
Consider taxes
Consider taxes
Finally, when making decisions about wealth sharing, taxes must also be taken into account; an outright gift is the simplest form but may not be tax efficient or provide creditor protection. A trust is a viable alternative for this purpose; see the report Planning for Multicultural Investors for more on trusts and trust basics and structures. It's important to remember that beneficiaries receive a “step-up” in cost basis with assets held in taxable accounts. This reset means that, at the time transfer, any original embedded tax obligation (based on the cost basis at which the assets were originally purchased) effectively disappears. As such, it may be an opportunity to make your wealth go further—by funding Legacy strategies primarily with appreciated securities rather than cash.
Although giving gifts at the end of life may not be the best for families, Waring suggests to "view inheritance as a lifetime exercise" so that you can enjoy your wealth and witness your impact together with your family.
Create and regularly review your plan
Create and regularly review your plan
Take action to maximize after-tax wealth for your family by creating a plan with your financial advisor that takes into account estate planning, taxes and investments. Your plan needs to be revisited every few years, as legal changes and personal circumstances may require adjustments. Getting started now ensures you have ample time to develop a thoughtful, informed course of action.
See these resources for more information on legacy and estate planning:
- Planning for multicultural investors
April 2022 - Legacy strategy: What are you planning to give, and to whom? 5 November 2019
- How to leave a meaningful inheritance 2 Dec. 2019
Disclosures
Liquidity. Longevity. Legacy.
Time frames may vary. Strategies are subject to individual client goals, objectives and suitability. This approach is not a promise or guarantee that wealth, or any financial results, can or will be achieved.
This article is for informational and educational purposes only and should not be relied upon as investment advice or the basis for making any investment decisions. The views and opinions expressed may not be those of UBS Financial Services Inc. UBS Financial Services Inc. does not verify and does not guarantee the accuracy or completeness of the information presented.
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