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Values-Based Wealth Transfer

For some, estate planning is limited to scrambling to update Wills just before a vacation. 

Even most professionally developed estate plans begin and end with numbers. 

While numbers are important, by themselves they do not tell the complete story.

That is why it is necessary for a fundamental change in how we think about and do estate planning: a process perhaps more aptly described as “wealth transfer.” Many have found that it is possible to achieve more through a “values-based wealth transfer” process than they ever dreamed possible.  A values-based wealth transfer begins with you and what is most important to you.  In this process you will explore your beliefs, feelings and values about money and its relation to you, your heirs and society at large.

In conventional estate planning, the old paradigm – The 50% Plan – strives to help you:

• keep as much of what you earn as you can and
• pass on to heirs as much of what you keep as you can.

Because of taxes, you generally get to keep approximately 50% of your total wealth to use during your lifetime or to pass on to heirs.  This is the “positive side” to your wealth – that which you can keep and pass along.  Advisors used to limit their focus to this part of your wealth. The other 50% – taxes – was typically viewed as being the “negative side” -something you cannot keep or pass along to heirs, and as such was viewed as having no value.

So along came the Insured 50% Plan – an aging paradigm. Many planners realized there is a way to replace, for the benefit of heirs, that part of wealth typically lost to taxes. Taking a relatively small portion of the part you can keep and paying an insurance premium makes it possible to:

• keep as much of what you earn as you can,
• pass on to heirs as much of what you keep as you can and
• replace what you cannot keep.

While this does increase the inheritance for heirs, you still have a positive and negative side to your wealth. What happens to the negative side? By default, it is lost to taxes, just as in the 50% Plan.

Enter Values-Based Wealth Transfer – a new paradigm – which empowers you to:

• keep as much of what you earn as you want, recognizing the need to achieve and maintain you financial independence,
• pass on to heirs an amount you deem to be appropriate, in accordance with each heir’s circumstances and needs and
• control the distribution of all that is left, recognizing an opportunity to self-direct your social capital legacy.

A values-based wealth transfer approach to planning uncovers your capacity, ability and perhaps even responsibility to control the transfer of all your wealth. 

Realizing both parts of your wealth are within your control, you become empowered to determine whether the social capital side of your wealth passed on as voluntary charitable contributions or government-imposed tax: a decision that many find far more rewarding than simply identifying and funding a tax liability.

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Need advice? Ask us.

Written by Jerry Gedir, President of Continuity Resources Group, an independent advisory services firm operating across Canada in the areas of Business Succession, Retirement Compensation, Wealth Transfer, and Gift Planning. Click here to visit his website: www.continuity.ca .