Matthew was in his mid-70s and had built a significant net worth, which he wanted to distribute as tax-efficiently as possible to his heirs. But he also wanted to ensure that his children would use the money responsibly and wondered about the best way to transfer his wealth while helping his children plan their own financial futures.
Both Matthew and his wife, Monica, questioned how they could use their wealth to benefit their children while still maintaining control over the funds they transferred. Was there a way to transfer wealth without using cash or securities, such as ownership in some form of business entity? How could they minimize their children’s tax liabilities while allowing them as parents to safely transfer their wealth?
Working with Bordeaux Wealth Advisors, we suggested there were potentially many ways to accomplish this control and discussed with them benefits of setting up a Family Limited Partnership (FLP). By listing himself and his wife as general partners and their children as limited partners, potentially combined with grantor trusts, this complex ownership structure might solve for maintaining control of assets and offer additional tax benefits. Further, their family might further consider having annual meetings to help their children understand their wealth, become comfortable with it, and gain valuable financial education about managing and investing the partnership assets.
When parents with a high net worth wish to transfer wealth to their children, it can be common for worries about the children’s money management to arise. This often leads to questions about the optimal way to transfer the wealth, and if there are ways to help their children better understand and manage their finances.
One of the challenges is to be able to look realistically at the best strategy for wealth transfer and determine how much control each party should have. In addition, we believe wealth transfer should be combined with family meetings and discussion to demonstrate ongoing money management skills to the children.
At Bordeaux Wealth Advisors, we develop financial plans and strategies for our clients to effectively assess their current wealth allocation and wealth transfer needs. For those who wish to transfer wealth, we propose customized solutions to meet their needs and ensure stable financial footing through portfolio reallocation. Once we have created a wealth transfer plan, we work with beneficiaries to ensure the family’s continued financial stability.
