Three Levels of Wealth, Part Three

by Jeff C. Johnson

Three dollar bills

A lot of people have less money than they need to quit working and live comfortably for life. They make do by continuing to work late into life, or by downsizing their living situation, or even by relying on others, often family members.

Their wealth-transfer planning is fairly simple, yet often neglected.

A smaller percentage of the population has enough to reasonably expect to live comfortably for life. They even have some residual wealth that will not be used up, though they may not have lots of room for financial mistakes.

This group, level two, often represents the bulk of clients at investment and brokerage firms. Certainly, the majority of the clients I have advised during the past 30-plus years fall into this category, so I know them well.

Having worked, saved, accumulated, and carefully invested their money, they sometimes have some difficulty even considering the present or future transfer of assets out of their accounts! Conditioned to “hold onto it” over their lifetimes, it’s new for them to contemplate what to do with the residual, the “amount greater than X,” as I explained in previous posts.

To begin the process, the selection of a right-fit estate planning attorney is extremely important. Ability to draft documents is not the only skill necessary to be a value-added lawyer. Asking the right questions, guiding conversation (a skill based on years of experience), and understanding family dynamics are paramount.

In my book, The Eight Points of Financial Confidence, I have a section devoted to the selection of the family wealth-transfer lawyer.

Next, it’s important to determine the amount greater than “X,” which is the money above that needed to provide for a comfortable, full lifestyle for life.

If you are in this second wealth category, a seasoned wealth adviser should be able to help with developing this important number. The remaining or residual wealth can now be considered in the wealth-transfer planning process.

In my next post, I will share four wealth-transfer options. There are only four categories of wealth transfer, but they are very important to consider once you have the foundation of a wealth-transfer plan in place.