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Jerry Citarella: The ABCs of transferring wealth to your heirs

Financial Truth

Posted: March 6, 2012 1:55 a.m.
Updated: March 6, 2012 1:55 a.m.

Over and over, I’ve heard people say they don’t want to spend all of their money so they can leave some for their kids. Many people actually intend to leave as much as possible for their heirs. Some are so committed to leaving a financial legacy that their own retirements suffer a bit.

Very often, people do much less than they could in retirement, consciously choosing to limit themselves for the benefit of their
children’s futures. Sadly, even though some are committed to this plan, many don’t do it as efficiently as possible.

Here’s one simple strategy I’ll share right off the bat: If you’re someone who will want to leave as much as possible to your heirs, you should immediately consider a properly structured permanent life insurance policy.

I often say, life insurance can be one of the best retirement plans, not because of the cash value it can accumulate, which is how it’s usually described, but because it allows you to spend your retirement assets without having to worry about leaving some of it. The kids will already be taken care of. Unfortunately, it’s an option many people will never consider.

People are often turned against permanent life insurance by self-help gurus in the media. They won’t even listen to good strategies.

Life insurance is often more expensive than other types of insurance, and people can’t get past the cost long enough to understand the benefits.

I’m often involved with people in the final stages of life. I know some of the choices made at earlier stages could make such a difference if people would listen and have proper foresight.

It amazes me how often great planning never gets done because people say, “That lady on TV said I should never buy permanent insurance.” Well, here it is publicly — she is wrong.

Here’s a very simple rule to remember. Once you’ve identified money you don’t intend to use during your lifetime, there are probably some great ways to transfer it efficiently and, most likely, multiply it dramatically.

Forget that a product or service with a cost might be what’s necessary. Remember your goal (to transfer and multiply wealth) and just do it as well as you can. If you’re younger and you know you’ll be someone who will have assets to leave, there’s no reason to wait before planning. In fact, it’s wildly more effective the earlier you get started.

In addition to leaving assets for your heirs, you must be aware of tax efficiencies that can be gained with proper planning. Whether minimizing tax on transfers or actually getting tax benefits while you’re still alive, many great strategies can be used.

The first and simplest step is to be sure to avoid probate. After that, the opportunities are endless. One thing people don’t realize is that taxes on wealth transfer sometimes cannot be avoided, but they can indeed cost less if you pay for them properly.

If every time you needed to spend a dollar, you could buy it for a quarter, you’d be excited right? You say yes, but so often when we share these opportunities with people, they say no. I don’t get it, but I hope more people will become open-minded.

I can’t tell you exactly how often people make horrible decisions due to preconceived notions, bad general advice or being closed-minded, but it happens all the time.

It’s this simple. Remember these words: If something makes sense, who cares what product or plan it takes to get it done? With proper planning, you can do many amazing things.

The trick is to work with people who know what they’re doing and are doing it with your best interest in mind. You also shouldn’t rely on someone on TV — who doesn’t know you at all — to provide the advice you need. Be smart.

Jerry Citarella is the owner of Infinity Wealth Management 23734 Valencia Blvd., Suite 301, Valencia, (661) 255-9555, ext. 11.  He is also the author of The Truth Helps Series of financial planning books.  Citarella’s column reflects his own views and not necessarily those of The Signal. Submit questions to:  Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC.  Infinity Wealth Management is not an affiliate of NEXT Financial Group Inc.


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