Getting wealth transfer
right the first time

Every advisor knows that wealth transfer can be either a multigenerational growth opportunity or a way to watch assets leave your business.

When it comes to wealth, they say you can’t take it with you. There are no do-overs in legacy planning, either. Every week my team and I talk to advisors trying to understand the ways trusts and annuities can fit together to help realize their clients’ financial goals.

In some cases, when annuities aren’t structured correctly inside a trust, clients or their beneficiaries may find themselves trapped in a disappointing situation. But with the right knowledge, you can ensure that the annuities contracts inside trusts are designed to reflect your clients’ intentions and needs. And trust planning can be a great way to learn about the next generation of your clients’ families and develop relationships with these potential clients.

To get the trust planning conversation right, here are some questions to discuss with clients:

  1. What’s the purpose of your legacy? If your clients already have a trust, it’s a sign they have specific intentions on how to pass on their wealth. Don’t be afraid to engage in a few open-ended questions that can help you understand what your clients’ legacy means to them.
  2. Who’s your beneficiary? An annuity inside a trust can be structured differently to benefit a grown child than a grandchild in a generation skip. You need to ask the hard questions: Should members of a blended family be treated differently? Do you have a child with special needs? Is there a spendthrift among your heirs?
  3. How will the wealth transfer affect your beneficiary? Once your clients have passed, will their beneficiary want to receive a lump sum of wealth or ongoing income? How tax-sensitive is the beneficiary – will the intended gift cause a tax hardship?
  4. Do you need income? When structured correctly, annuities inside trusts can provide reliable income in a tax-efficient way that can continue for your clients’ beneficiary. This important factor can affect how to best compose the strategy.   

We can’t turn back time, but we can help you get legacy planning with trusts right the first time. To hear more details on trusts and annuities, particularly the implications of annuity death claims, contact your Lincoln representative. And don’t forget to follow us on  LinkedIn  and  Twitter  for regular insights and tips on better income planning conversations.


About the author

Michael R. Harris, CFP®, CLU®, ChFC®, CFS®, CES®,  is vice president of Sales for Lincoln Financial Distributors. Since 1999, Mike has helped financial professionals gain a better understanding of the challenges and opportunities surrounding income distribution planning. He joined Lincoln in 1990 as a securities trader and led the creation of the bond trading desk. In 1992, Mike transitioned into a Regional Life Marketing Director in support of Lincoln’s life insurance products and soon after began working closely with American Funds Distributors to start Lincoln’s American Legacy sales team.