Estate Planning 101

You’ve accumulated a certain amount of wealth–from big gains in the stock market, building your own business or savvy real estate investments.

The next thing you want to consider is how to preserve your assets so you can pass them on to your heirs.

Basic tools

If you’re just beginning to think about wealth preservation, there are some easy-to-understand investment vehicles you can take advantage of immediately. Park Ridge financial planner Carole Peck says Roth IRAs are an excellent and tax-advantageous way to accumulate assets.

“Roth IRAs are one way to preserve wealth without major estate planning,” Peck says. “It will grow tax free and pass to future generations tax free.”

In addition, Peck recommends 529 college savings plans, which also allow you to defer taxes. Peck likes 529 plans because you can easily change beneficiaries and you have a big window of time to use the money.

Pass on your valuables – and your values

High-net worth individuals need to devote serious attention to estate planning, according Lake Forest’s Maureen Raihle, who is a private wealth advisor with Merrill Lynch Private Banking and Investment Group in Chicago. Raihle says one of the most important things families can do to preserve wealth is communicate.

“There is a substantial portion of wealth created by entrepreneurs and business owners, but as future generations inherit that wealth, they lack the discipline to maintain it,” she says.

If you want to avoid that scenario, Raihle recommends you begin talking to your heirs at a young age about your work ethic, philanthropic values and how you’ve built and maintained your wealth—so that they can continue your legacy.

Create a plan that works for you

Of course, talking alone won’t ensure that your assets are preserved and transferred according to your wishes. That is where proper estate planning comes in. Consider all of your goals, and then allocate assets accordingly. Deerfield financial advisor Anita Kraus, who is a vice president for Morgan Stanley Smith Barney, recommends meeting with your financial advisor on a quarterly basis.

“There is no ‘off-the-rack’ solution,” Kraus says. “Everyone’s circumstances are different, which is why it is important to develop a relationship with a competent financial advisor who will take time to get to know you.”

Begin with a living trust, Kraus advises, and then incorporate tax-planning and gifting strategies as needed. And, she reminds people to review and update plans and legal documents on a regular basis.

“I always tell my clients that we can’t just put their portfolio in sock drawer and forget it,” Kraus says.