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Wealth Planning

Four beneficiaries of wealth

People often associate estate planning with creating wills and trusts. However, before deciding what documents you need to draft and strategies you need to implement, you first need to articulate your goals for your wealth—specifically, who are the beneficiaries of your wealth and when do you want those beneficiaries to benefit from your wealth. Creating a list of your beneficiaries could help to ensure that you include everybody you intend to share in your wealth and give you direction as to what estate planning documents you need and what approaches you may want to consider.

Define your beneficiaries: Planning thoughtfully can help you direct assets to one or more beneficiaries, avoid other beneficiaries and even prevent certain beneficiaries from receiving assets by default (since this is often unintended). Generally, there are four classes of beneficiaries to consider:

You and your spouse
If you plan on spending all your wealth during your lifetime, then you are the beneficiary of your wealth. Even if you don’t plan on having money left over after you pass away, though, it’s a good to include someone to inherit upon your death since most people usually don’t pass away just as they’ve spent their last cent. Generally, if you and your spouse plan to spend all your money during your joint lives, you will likely not need to worry about eventual estate taxes since you hope to have an empty estate. Maintaining control of your assets during your life may be an important goal for you.

Friends and Family
After providing for yourself, you may want to provide for your family members—specifically children (if you have any) and future descendants or other close relatives. You may choose to leave assets to family members only after your and your spouse’s deaths, or you may choose to give them these assets during your lifetime; of course, if you give assets away during your lifetime, you will no longer have access to them for yourself or your spouse, so you should do so if neither of you will need these assets during your lifetimes.

Like friends and family, charities can be beneficiaries of your wealth during your lifetime or upon your death, or both. It’s important to define your charitable goals and how they fit into your broader wealth plan to understand whether it makes sense to be charitable during your lifetime. Sometimes your charitable goals are motivated by tax benefits (e.g., getting an income tax deduction for your charitable contributions), or perhaps you want to further a specific cause for personal or even professional reasons, or perhaps you want charity to be the cornerstone of your family legacy. There are a number of ways to incorporate charity into your wealth plan, but the first step is identifying that you in fact want charity to be a beneficiary of your wealth.
The last potential beneficiary of your wealth is the government, whether in the form of annual income, corporate or other taxes, or upon your death in the form of estate taxes. While many individuals would say that they want to minimize the amount that goes to the government, often doing so may involve your losing personal control and benefit of assets during your lifetime, or reducing the amount your friend and family beneficiaries may get after your death. It’s important to understand the planning strategies available to minimize taxes and how they impact your other choices of beneficiaries of your wealth.

Assuming that you don’t spend all of your money, think about the trade-offs and how they may affect your goals. For example, you can reduce the amount the government gets after you die by increasing the amount passing to charity—but gifts to charity may come at the expense of gifts to your friends and family.

Listing the beneficiaries of your wealth is the important first step in your estate plan. For some, this may be easy; but for others, in particular those who do not have children or family members they want to provide for or charities they wish to support, it may be much more difficult. Really think about which one or more of these four beneficiaries of wealth are important to you. Once you’ve made this decision, you will then need to express how and when you want your beneficiaries to receive their share of your wealth. Often you will need to reconcile competing priorities and decide what is most important to you. You may need to choose between different planning strategies or investment allocations that are appropriate for different goals. Consider consulting an estate planning attorney or tax professional to discuss and express these priorities.

This process may seem daunting, but your J.P. Morgan Advisor is here to help you take this important first step in ensuring that you are able to lead the life you would like to lead and create a fitting legacy no matter who you intend as the beneficiaries of your wealth.






KEY RISKS. This material is for information purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). This material is intended to help you understand the financial consequences of the concepts and strategies discussed here in very general terms. The strategies discussed often involve complex tax and legal issues. Your own attorney and other tax advisors can help you consider whether the ideas illustrated here are appropriate for your individual circumstances. JPMorgan Chase & Co. does not practice law, and does not give tax, accounting or legal advice. We are available to consult with you and your legal and tax advisors as you move forward with your planning.  There may be different or additional factors that are not reflected in this material, but which may impact on a client’s portfolio or strategy. Please read all Important Information. 

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