What does a successful wealth transfer plan look like?

Kelly Broderick

William J. Fleming

A mistake people often make when planning to transfer their wealth is treating it as a distribution plan. Who gets what? How much? Through which documents? And how to ensure it is passed on as tax efficiently as possible? To be fair, those questions matter. But they can only be answered once you know what you want your wealth to accomplish.

Your definition of success may mean passing on generational wealth, making sure a surviving spouse or partner maintains their lifestyle, preserving a family home or giving to causes that have shaped your community. The clearer you are about the outcome, the easier it becomes to create a plan that meets your personal definition of success.

Here’s how to begin building a wealth transfer plan around the outcomes you want to achieve.

1. Balance your needs with your legacy.

Before you can determine what to pass on, think about how to balance your own needs with the legacy you hope to leave.

Most people fall somewhere within a general range. On one end are people who want to maximize their lifestyle and income during their lifetime, even if that means leaving less to heirs. On the other end are people who are willing to live more conservatively in order to preserve as much wealth as possible for children, grandchildren, other family or charitable causes, for example.

Determining where you are on that range will help you define your strategy. For example, you may want to use your wealth during your lifetime to travel, support charitable causes, help a child buy a home or fund a grandchild’s education. While those decisions may reduce what is ultimately left to heirs, you could still meet your ultimate goals and make a meaningful difference while you are alive.

2. Decide what you’re really trying to pass on.

Wealth transfer is primarily focused on financial assets. But for some people, success means passing on the habits, priorities and values that helped create and preserve wealth in the first place.

Depending on your values, a successful wealth transfer plan may emphasize education, encourage charitable giving, preserve a work ethic, maintain a family property, sustain a particular interest or help future generations understand the responsibility that can come with inherited wealth.

This is where your definition of success becomes especially important. If you want inherited wealth to support long-term security, the plan may look different than if you want it to support education, entrepreneurship, philanthropy or care for future generations. Likewise, a plan designed to provide structure and controls may look different from one designed to give heirs more flexibility in how they use what they receive.

3. Plan for the family you actually have.

A successful wealth transfer plan should reflect the realities of the people you want to support.

Family makeup, financial maturity, health needs and personal circumstances can all affect how you pass on your wealth. For example, minor children or young adults may need more structure before receiving significant assets outright, while a child with special needs may require planning that provides long-term oversight. If heirs have different financial maturity levels, the plan may need to include guardrails for how and when assets are distributed.

Remarriage, blended families and partners can also require additional care. Depending on your relationships, your plan may need to balance support for a current spouse or partner with the desire to pass on assets to children from a prior marriage.

4. Match your planning tools to your goals.

Once you understand what you want your wealth to accomplish, you and your estate planning team — with attorney, financial planner and accountant representation — can begin recommending to you and choosing the tools that support your goals. Those tools may include a will, a revocable trust, beneficiary designations, powers of attorney, healthcare proxies, charitable vehicles, guardianship of minor children or irrevocable trusts that provide creditor protection and structure for asset distribution.

For example, a trust may be useful if you want to provide structure for young heirs, protect assets for a beneficiary with special circumstances, preserve privacy or create continuity after death. Beneficiary designations may help certain assets transfer directly. Often, your advisors will help you create one coordinated plan made up of multiple tools that work together to help ensure each asset is handled in a way that supports your broader goals.

5. Revisit your plan as life changes.

A wealth transfer plan should evolve as your life, family, assets or definition of success changes.

Make sure to review your plan any time there is a major life event in your family, such as marriage, divorce, birth or adoption, a death, a significant health change or children who reach adulthood. You may also want to update your plan if household income changes dramatically, or due to a liquidity event such as exiting a business you may own. Regular reviews can help address the ever-changing tax, legal and investment landscapes.

Remember, a successful wealth transfer plan is one that reflects your personal definition of success, not anyone else’s. By defining your purpose first, you can build a plan that meets your needs while intentionally shaping the legacy you wish to leave behind.

Kelly Broderick is the chief fiduciary officer for Cambridge Trust Wealth Management, with oversight of trust and estate services. She brings 20 years of experience providing fiduciary expertise and guidance within the wealth management industry. She may be reached at kelly.broderick@cambridgetrust.com.

William J. Fleming, CFP, CTFA, CEPA,  is the manager of financial planning for Cambridge Trust Wealth Management. He may be reached at william.fleming@cambridgetrust.com.