Three Levels of Wealth, Part Five

by Jeff C. Johnson

Strangers in Paradise by James Grubman

From my previous posts, you know most people have little to do with regard to their wealth-transfer planning. They need to see a lawyer to get a will and some other health-care documents. Still, it’s unfortunate that many people don’t do end-of-life planning, probably to avoid considering an uncomfortable topic (their future and hopefully far-off death).

A small number of people, those who make up most of the so-called “1 percent,” have some wealth-planning matters that require regular attention.

The last group is level three wealth. If you hadn’t already anticipated it, these are the folks that travel on their own planes and have a yacht anchored in a warm climate. They own multiple homes and have household employees.

Because of their wealth, often little financial planning for their life-spending requirements is necessary. They largely can spend whatever they please.

But the wealth-transfer planning needs of this third group are significant and ongoing. Though everyone should review and update their wealth-transfer documents and health-care directives, this level three category needs to have a wealth-planning and -transfer team in place continuously.

This team should include a lineup of professionals with significant and specialized experience.

A trusted legal team is the foundation for the work that is going to get done. Advice, drafting documents, and keeping up-to-date with issue awareness are all part of the estate planning lawyer’s service to clients.

Life insurance is an incredibly useful tool because the gain on a life insurance policy is income-tax-free. Combined with a life insurance trust, the proceeds can be estate-tax-free as well, if proper procedures are followed. (A solid legal team should be involved!)

Additionally, professional trust services are likely to be required to manage assets for future generations. Valuation experts might be needed to value privately owned businesses.

The family wealth adviser probably plays an important role in coordinating this “committee” and making sure ongoing attention is paid to changing family dynamics, business and economic ebbs and flows, income and estate tax laws and regulations, and shifting wealth-transfer wishes.

My Buckingham Strategic Wealth colleague Larry Swedroe, our director of research and a prolific author, recommended a marvelous book to me, Strangers in Paradise by Dr. James Grubman. If you have created or inherited significant wealth, this book was written for you and your family. Pick up a copy and be intentional and ongoing in your wealth-transfer planning.