Basic Questions About Estate Planning – What is Family Wealth Planning?

When people create an estate plan, they often have questions about strategies meant to keep as much of their wealth as possible in the family. When it comes to family wealth planning, there are a variety of strategies available that most people can use to ensure that their money and property stay with their closest loved ones. Even people who do not consider themselves wealthy can use these tactics as a way to exert better control over their estates and to ensure that their closest loved ones benefit from their money.

While many of the ideas surrounding family wealth planning can become complicated, especially when you deal with issues such as taxation, business law, and other similar topics, we are going to take a look at some basic family wealth planning questions that a lot of people can use.

What can I do if I want to give gifts to family members?

Developing a lifetime gift-giving strategy is one of the simplest, and potentially most effective, ways to ensure that you keep as much of your wealth as possible in the family. While there are specific tax rules and limitations that come with lifetime gifts, you can develop a simple gift-giving plan that will allow you to give as much as possible to individual family members every year without incurring tax penalties. This essentially means that you can give yearly gifts to whatever family member you wish without worrying about having to pay taxes on the gifts, up to a specific limit.

Can I use a family business to transfer wealth?

Absolutely. If you run a small business, or family business, there are many ways you can more effectively transfer wealth to family members through the business operation. For example, if you employ a family member as a company employee, you may pay that person’s salary, provide that person retirement or medical benefits,  and compensate that person for any business-related expenses. Again, while running a family business does involve significant tax and legal limitations, it nevertheless provides you with much greater flexibility when it comes to being able to transfer wealth to family members employed by the business.

Should I make family loans?

It might be beneficial to make loans to family members as a way to transfer wealth, but only in limited circumstances. As with other gifts or wealth transfers, there are rules and limitations associated with making loans to family members. However, loans, unlike outright gifts, can be effective tools because they carry with them the added element of financial responsibility. Of course, using loans as a way to transfer wealth to family should only be done once you have decided on the comprehensive family wealth strategy.