Although many people think of their asset portfolio as one item, it's actually composed of many smaller assets. And each of these assets may have a different impact on how your accumulated wealth transfers to your heirs. To help you make your estate transfer simple and effective, here are a few things to know about planning for different assets.
1. Cash and Equivalents
The easiest type of asset to pass on to heirs is cash and things that are equivalent. It's easy to value these assets and divide up that value. They liquidate or are transferred fairly simply. And you can tailor the division to specific percentages if that's your desire. In addition, cash and equivalents (such as life insurance or certificates of deposit) rarely come with sentimental complications.
Reduce the complexity of your estate for heirs by consolidating these accounts. You might even want to liquidate some other, more complicated, assets to make things easier.
2. Real Estate
Your primary home and any investment or vacation properties are a good source of family wealth. Real estate appreciates so heirs may get a good asset with additional potential for growth. However, they can be very complex assets to pass on if multiple heirs are involved. Sentiment and emotions often get in the way, and heirs may disagree over how to use the property.
Consider solutions like using a family trust or selling the property and allowing individuals to purchase it if they wish to keep it. And speak openly and honestly with heirs about what they want from properties—so you and all of them are on the same page.
3. Pensions and Annuities
If you have access to an employer pension or set up an annuity, this can be a great type of asset to leave behind to certain heirs. The biggest reason is that they provide long-term (or lifetime) stable income sources. Heirs may also get tax benefits compared to other assets.
A guaranteed monthly check can provide reliable support for a spouse or children. Some people also use this type of structured income to provide income for children or family members who might waste a lump sum.
4. Sentimental Items
Probably the most potentially fraught asset to leave to heirs is anything with a sentimental attachment. The emotional component can create a lot of family conflict. When such items have financial value, the problem is compounded. However, you probably don't want to liquidate these items either.
Be sure to take into account both financial and personal value so that you can equalize the value of what everyone gets. Also, name specific heirs or set up trusts, when possible, so as to avoid arguments over big-ticket items.
Where to Start
The best way to create an estate that's easy for heirs to manage and that reduces conflicts is to understand the pros and cons of different asset types now. Start by meeting with a wealth management service today to learn more.Share