Three Levels of Wealth (and Wealth Transfer), Part One

by Jeff C. Johnson

One dollar bill

Over time, as I’ve worked with and advised thousands of clients, I’ve realized that there are essentially just three levels or categories when it comes to wealth transfer. Each of these involves taking a different approach to transferring wealth to heirs and to charity.

Many people have just enough money saved to live the rest of their life, or some amount less than that, whatever it is. (Sadly, a large number have no money saved at all.) This is the reality of life, now and probably always. This is also the first level of wealth. 

When it comes to estate planning, there’s not much that must be done because there’s not much that will be left over at the end of life. Still, there is a need for a will because even a modest or minimal amount of assets or property can leave complications for loved ones. Directives and last wishes should be made known to relieve next of kin from the burden of difficult decisions.

If you love anyone, and they love you back, you need to see a lawyer and make sure you’re ready in case the unthinkable occurs. Then, decide to stay healthy and live a long time!

You may think that people with minimal wealth and a definite need to conserve the money they have would never give money away.

Well, that’s simply not true.

Level one wealth doesn’t exclude charitable people. They write checks to local charities and drop a “10” in the church offering plate. Having been involved in our local community foundation and as a trustee at my church, I am overwhelmed by the number of gifts from people with little or no financial means.

These gifts are almost always the result of a charitable heart, as tax deductions usually are not needed and nearly never a motivation.

Though most level one financial situations are not overly complicated, end-of-life planning and important health-care directives require attention, as does thoughtful cash management and income management, budgeting, and planning.

Two upcoming posts, on level two and level three wealth, address investors with greater wealth and more responsibility to their family and heirs, and perhaps a much greater responsibility to their communities and the world.