Related Information

Wealth Transfer & Gifting Strategies

Developing Wealth Transfer Strategies

You have a variety of gifting strategies and wealth transfer tools that can help you distribute your assets to your family and other beneficiaries. Below are some techniques that may help you meet your estate planning goals, such as avoiding probate and reducing estate taxes.

Wills: Distributing assets to beneficiaries
Beneficiary designations
Gifting to individuals and trusts
Transferring wealth using trusts
How Wells Fargo Advisors can help

Wills: Distributing Assets to Beneficiaries

Wills are simply plans for distributing assets to family members and other beneficiaries. If you die without a will, your state law will determine how your assets will be distributed.

Although wills do not help avoid probate (in fact, to be effective, your will must be filed in probate court), they're still an important part of your estate planning and wealth transfer strategy. You can work with your attorney to create (and revise) your will to meet your goals, including naming the executor of your estate and, if you have dependent children, designating a guardian for them.

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Beneficiary Designations

Annuities, life insurance, IRAs and retirement plans are just some of the assets that let you designate beneficiaries. The assets are automatically distributed to that beneficiary upon your death, which means they generally avoid the probate process.

Note: Beneficiary designations take precedence over any other instructions you provide in a will or trust. Keep that in mind when you're developing your estate plan.

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Gifting to Individuals & Trusts

In its simplest form, gifting is a wealth transfer strategy that represents an opportunity to transfer assets to children or other beneficiaries during your lifetime and reduce your taxable estate. Sophisticated gifting techniques can also help you:

  • Provide income for yourself or your heirs
  • Leverage your annual exclusion gifts
  • Pay for a child's education

Annual gifting. You may gift up to $14,000 per person per year tax free ($28,000 per recipient for married couples who combine gifts). This amount is called the annual exclusion. Any gift over that amount requires you to file a gift tax return.

  • Medical and education expenses. If you pay someone's medical or education expenses directly to the provider, the gift is not included in your annual exclusion amount. For example, if you pay $25,000 for your grandchild's tuition directly to the school in 2013, you can still gift up to $14,000 tax free to him or her this year ($28,000 for a combined gift from you and your spouse).
  • Gifting to 529 college savings plans. If you're helping your child or grandchild save for college using a 529 college savings plan, you can gift up to the annual exclusion per year tax free or you can make up to five years' worth of annual exclusion gifts ($70,000 per single donor; $140,000 per couple) in one year to benefit any one person.

    Note: If you contribute the maximum amount using the five-year acceleration rule, you will not be able to make other annual exclusion gifts to that beneficiary for five years without incurring gift tax consequences and filings. And if you die within five years of the date of your gift, a prorated portion of the original gift will be included in your estate tax calculation (any growth will not be included).

    Before investing, you should consider whether your or your beneficiary's home state offers any state tax or other benefits that are only available for investments in that state's 529 college savings plan.

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Wealth Transfer Using Trusts

Many types of trusts can help you accomplish your estate planning goals. Below are two common types of trusts designed to help you transfer your wealth efficiently while avoiding probate and reducing estate taxes:

  • Life insurance trusts. An irrevocable life insurance trust lets you keep the death benefit of your life insurance policy outside of your estate (and out of probate), which means your life insurance proceeds will not increase your estate tax liability. In fact, you can design your life insurance trust so that the proceeds are available to be applied toward your estate tax liability, leaving more of your actual wealth for your heirs.
  • Irrevocable gift trusts. You can give beneficiaries access to gifted funds according to the standards you set, until the beneficiary reaches an age that you select; these trusts can even continue for multiple generations.
  • Revocable living trusts. Although revocable living trusts are still part of your taxable estate, they do help you efficiently transfer wealth to your heirs and help them avoid the probate process.

Learn more about using trusts in your estate plan.

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How Wells Fargo Advisors Can Help

Any wealth transfer strategy such as preparing wills, gifting to beneficiaries and establishing trusts requires the help of your attorney and qualified tax advisor. Your Financial Advisor can work closely with you to provide the information they need to help you meet your goals. In addition, your Financial Advisor can provide the investment services needed to implement your plan, including a broad range of trust services available through Wells Fargo Bank, N.A.

Contact your Financial Advisor to learn more about gifting and other wealth transfer strategies.

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Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Wells Fargo and its affiliates do not provide legal or tax advice. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.

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