Planning for Your Family
As parents, we influence our children in many ways. This influence is part of your legacy to them, and is instrumental in the development of their values and attitudes. Your business success will allow you to create a financial legacy for Bob. The wealth that will someday change hands may be significant. One of the most important aspects of financial legacy involves the steps that you take to help Bob gain an appreciation for your work and its results, and to encourage him to take a responsible approach to its management. This legacy you have created is a wonderful gift but it can create concerns for parents.
On a second level, it is important to consider the mechanics of wealth transfer - how to efficiently transfer wealth between generations and how to ensure that these are managed efficiently once in the hands of beneficiaries.
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Distributing wealth to family requires considerations on several levels.
What to do?
Your effort to help him appreciate the wealth that has been accumulated does not begin the day that the wealth begins to change hands. This is likely something that you have worked on for some time and will work on as you raise him. However, as you begin to consider life after business and as your assets evolve from bricks, mortar and goodwill to financial assets we expect you will begin to think about how to best introduce your child to this wealth that will, in part, benefit him.
In our experience, a very significant concern of parents relates to the possible negative impact that "too much money" can have on their children.
How to do it?
In simple terms, at death an individual is deemed to have sold all his or her assets for fair value. This fair value transfer triggers any unrealized and untaxed gains creating, possibly, income tax owing in the year of death. One exception to this rule relates to transfers of assets to a spouse. These transfers can occur at cost. But in practical terms, this means that tax will likely be assessed on the death of the second spouse. Your wills are structured in this way.
There are a few basic planning strategies that can be used to mitigate your eventual exposure to tax, maximize the portion of your wealth that can be preserved and to help ensure that your wealth can be responsibly managed in an efficient manner following your deaths. As we move forward with you, we will work to evaluate some of the tools, steps or changes that may make sense for you - ones that compliment your current situation.
Some of the areas that we will focus upon include your business structures and your wills.
