When people think about wealth management, they often think about investments, retirement planning, taxes, or creating a strategy for generating income. But there is another important question that deserves a place in the conversation:
What happens to your wealth when you are no longer here to manage it?
Estate planning is not only about deciding who receives your assets after your death. It can also help ensure that your financial accounts, retirement savings, property, and other assets are coordinated with your broader financial goals.
For that reason, estate planning can be an important part of a comprehensive wealth management strategy.
Your Investment Strategy Doesn't End With You
A well-designed investment portfolio is built around your goals, time horizon, risk tolerance, and financial needs. But those considerations can change when the objective shifts from growing and using wealth to transferring it.
For example, someone approaching retirement may be focused on creating sustainable income from their investments. At the same time, they may also want to leave assets to children, grandchildren, a charity, or another loved one.
Those goals can influence how accounts are structured, how beneficiaries are designated, and how assets may ultimately be transferred.
This is where estate planning and wealth management intersect.
Rather than viewing estate planning as something separate from an investment strategy, it can be helpful to consider the two together.
Beneficiary Designations Matter
One of the simplest—and often overlooked—parts of estate planning is keeping beneficiary designations up to date.
Retirement accounts and certain insurance policies generally pass directly to the beneficiaries named on those accounts. Beneficiary designations can also be used with certain non-retirement investment accounts, depending on how the account is structured.
Importantly, beneficiary designations can take precedence over instructions contained in a will. That means an outdated beneficiary designation could potentially result in assets being distributed differently than intended.
Life changes can make this especially important. Marriage, divorce, the birth or adoption of a child, the death of a beneficiary, or other significant changes may create a reason to review beneficiary designations.
A periodic review can help ensure that account beneficiaries continue to reflect your current wishes.
Account Ownership Is Part of the Bigger Picture
It's not only about who receives an asset. How an asset is owned can also affect how it is transferred.
Individual investment accounts, joint accounts, retirement accounts, trusts, and accounts with transfer-on-death arrangements can have different rules and processes when an owner dies.
For example, certain brokerage accounts may allow an owner to designate beneficiaries through a transfer-on-death arrangement. Depending on the circumstances, this may help assets transfer outside of probate. However, the designation still needs to be coordinated with the individual's overall estate plan.
This is one reason it can be valuable to look at an individual's financial picture as a whole rather than reviewing each account independently.
Estate Planning Can Help Connect Your Financial Goals
Estate planning isn't just about distributing assets. It can also provide an opportunity to think about what you want your wealth to accomplish.
For some families, the goal may be to provide financial support for children or grandchildren. For others, it may involve charitable giving, preserving a family business, or helping provide for a surviving spouse.
The right approach will depend on an individual's circumstances, goals, family structure, and applicable laws.
A wealth management conversation can help identify the financial pieces that may need to be coordinated, while an estate-planning attorney can provide legal guidance and prepare the appropriate documents.
Don't Forget About Incapacity
Estate planning is also about what happens during your lifetime, not just after it.
An unexpected illness or accident could leave someone temporarily or permanently unable to manage financial or healthcare decisions. Documents such as powers of attorney and healthcare directives can help establish who may make certain decisions if an individual becomes unable to do so.
These decisions can be particularly important for retirees and individuals with significant financial assets, but estate planning considerations are not limited to older adults.
Having a plan in place before it is needed can help reduce uncertainty for both you and your family.
Estate Planning and Tax Planning Can Overlap
Estate planning can also intersect with tax planning.
The tax treatment of inherited assets can depend on factors such as the type of account, the beneficiary, the timing of distributions, and applicable federal and state laws. Retirement accounts, in particular, may have specific rules that beneficiaries need to consider.
Because tax laws can be complex and change over time, estate and tax strategies should be evaluated based on an individual's circumstances and with appropriate professional guidance.
A coordinated approach can help ensure that investment, retirement, tax, and estate-planning decisions are not being made in isolation.
A Wealth Plan Should Look Beyond the Investment Account
A strong wealth management strategy is about more than choosing investments.
It can involve asking questions such as:
- Are my investments appropriate for my goals and time horizon?
- How will I generate income in retirement?
- Are my retirement accounts structured appropriately?
- Are my beneficiary designations current?
- How are my major assets titled?
- Do my financial accounts align with my estate plan?
- Who would make financial or healthcare decisions if I could not?
- What do I want my wealth to accomplish for the next generation?
These questions don't necessarily have simple answers, and everyone's circumstances are different. But asking them can help create a more complete picture of a family's financial plan.
When Was the Last Time You Reviewed Your Plan?
Estate planning is easy to put off, particularly when everything seems to be going well. But your financial plan can change significantly over time.
A marriage, divorce, new child, retirement, inheritance, business sale, significant change in assets, or relocation may all be reasons to revisit your estate plan and beneficiary designations.
Even without a major life event, reviewing your plan periodically can help ensure that the different pieces of your financial life continue to work together.
Estate planning doesn't have to be a conversation reserved for the future. It can be part of the wealth management conversation today.
By coordinating investment, retirement, tax, and estate-planning considerations—and working with the appropriate financial, tax, and legal professionals—you can work toward creating a financial plan that not only addresses your needs today, but also reflects how you want your wealth to be managed and transferred in the future.