How to Transfer Your Wealth On Your Own Terms
Estimated reading time: 5 minutes
Most SDIRA investors work hard to self-direct an investment portfolio that leverages tax-advantaged accounts. As 10,000 of the 78 million baby boomers turn 65 daily, the United States is getting ready to undergo the largest wealth transfer ever seen.
Because retirement planning is about planning for your future and working toward growth, it might be difficult to take a moment to think about what will happen to your accounts after you are gone. If you want to make the most of the investments you have carefully managed, there are several things to keep in mind to make sure your financial legacy stays true to your investment principles and capitalizes on the most tax-advantageous options for you and your family.
Take time to meet with financial and legal consultants to create a plan for passing your investment accounts on to your designated beneficiaries. Different types of accounts have different rules and requirements for beneficiaries, so it’s important to have a detailed conversation with your financial counsel to be sure that everything is set up the way you want.
Just like you self-direct your investment accounts, you also have the opportunity to work with advisors to direct your wishes for the transfer of your accounts. Taking the time to create a plan ensures that your investing legacy will be passed on in a way that aligns with your financial plans.
It seems like a simple thing, but making sure you have beneficiaries designated for your accounts is crucial. When a beneficiary is not designated for an investment account, a number of different scenarios can happen. The account may go to the estate, be subject to a will, or it might even have to go through probate. Regardless of the outcome, not having a designated beneficiary is far more complicated for the people involved, and it is potentially expensive. All the wealth you have worked to grow in a tax-advantaged way could be exposed to fees and taxes that could have been avoided with the right planning.
Talk to Your Family & Beneficiaries
We know this can be a tough one. You have worked hard, and you want to sit back and enjoy your retirement. You may not want your family to worry, so you avoid talking about the financial realities of the future. But it is important to remember that navigating the process of account transfers and being a beneficiary can be challenging.
Giving your family and designated beneficiaries a heads up about what you have arranged will make a difficult time easier for them. Here are some of our best tips for starting a financial conversation with the people you care about.
Take the First Step
Most likely your adult children want to talk to you about your retirement plans, but like you, they may be nervous to bring up a difficult subject. As the retiree and parent, you are in a position to lead the conversation. Many adult children want to find ways to assist their parents during their golden years and support their parent’s ambitions. By approaching your children with a plan and information, they will be better prepared to help you realize your goals.
Begin an Ongoing Conversation
It is important to remember that conversations about big topics like retirement and the wishes for your financial legacy are often ongoing conversations. You may not want to share everything at once, but you can start small and keep in mind that this topic will probably need several conversations.
Remember the Relationship
Financial conversations, like many important conversations, take place in the context of a relationship. Every family has different ways of handling sensitive topics, and only you can know how your family will engage the best. It’s always a good idea to choose a relaxed time and comfortable setting that gives you plenty of time to walk your family through your wishes and answer any questions they may have. You may also want to prepare any documentation you want to share ahead of time.
It can be easy to think that you are spry and healthy and this conversation can wait. But that is exactly why now is a good time to begin talking to your family about your retirement goals. If you are able to have the conversation while you are healthy, you can discuss the topic clearly and have control over expressing your desires. This way the conversation does not run the risk of being complicated by health concerns or family tensions around caregiving.
When You Can’t Talk to Your Family or Beneficiaries
Some family situations are complicated, and that can make these conversations even more difficult. If you are not able to talk to your family about your financial wishes and legacy for any reason, it is extremely important to work with an advisor you trust to create a clear plan. It is also still important to designate beneficiaries.
Your Legacy is More Than Your Wealth
Preparing your family and beneficiaries to be knowledgeable about the process when they inherit your investment accounts is just one part of leaving a legacy. As someone who takes control of your investment choices by self-directing your accounts, you have a wealth of knowledge and the opportunity to share your financial worldview. Educating your family and those you love about tax-advantaged accounts and the possibilities of investing in assets they truly care about is another way of transferring wealth and leaving a legacy that will outlive you and your investments.
Managing an SDIRA is all about taking control of your retirement portfolio and choosing the investments that are right for you and your goals. At Entrust, we champion our clients and share their independent, forward-thinking spirit. We know that investing is for the future, yours and your family’s. That’s why we encourage every client to designate beneficiaries for their accounts. If you need to designate a beneficiary or update your beneficiary designations, you can login to the Entrust Client Portal. You’ll find a way to update or add your beneficiaries on each account tile of the Dashboard. You can also submit paperwork and download our Beneficiary Designation Form found under the Manage Your Account tab. For more details about the ins and outs of legacy planning, check out our Legacy Planning Guide.
And if you are already an Entrust client and you have a friend you think might be interested in self-directing their retirement account, share your wealth of knowledge about SDIRAs with them. To do so, get your link from the “Refer a Friend” section in your portal and share it. Thanks to our referral program, you’ll get $50 off your recordkeeping fees if they open and fund an account, and they’ll get a jump start on their own financial legacy because we will waive their account establishment fees.