The Importance of Aligning Your Investment Strategy with Your Estate Plan

By Judson Embree, CTFA, Investment Advisor, Bryn Mawr Trust

When it comes to managing your wealth for the future, having a sound investment strategy is paramount. However, equally important is ensuring that your estate plan is closely aligned with these investment choices. The synergy between how you manage your assets today and how you plan to pass them on to beneficiaries can significantly impact your financial legacy and security.

Understanding the interaction between your investment strategy and estate plan requires recognizing the ultimate goals for each. Investment strategies generally aim to achieve specific financial outcomes such as growth, income, or preservation of capital over a certain period. Estate planning, on the other hand, focuses on efficiently transferring these accumulated assets to your heirs or chosen beneficiaries while minimizing tax liabilities and fulfilling any specific legacy wishes.

Aligning these two facets involves several key components:

1. Be Consistent in Your Goals and Objectives

Investment choices should reflect the goals and objectives of your estate plan while aligning with your risk tolerance. Once your goals are defined and your risk tolerance established, you’ll want to choose the right mix among stocks, bonds, cash, or alternative investments, often referred to as “asset allocation.”

Diversification is key. Within those types of assets, you should generally have some domestic and international exposure with some exposure to different market capitalization companies (small, medium, and large) and varying investment sectors, such as energy, technology, and health care.

2. Tax Considerations

Investment decisions can have significant estate, gift, transfer, capital gains and income tax implications for you and your heirs. For example, high-growth investments can lead to substantial capital gains, which could impact your estate’s tax liabilities and beneficiaries. An individual having a taxable estate is now less common than it used to be several years ago. However, unless Congress acts, the expiration of some of the provisions in the Tax Cuts and Jobs Act may necessitate tax planning discussions by January 1, 2026.

3. Legal Structures and Ownership

How your assets are legally held can affect how they are passed on upon death. Investments held in joint tenancy, in IRAs or within trusts have different implications for your estate plan. For instance, assets owned in a revocable trust can bypass probate, leading to a smoother and potentially more private transition. Ensuring your investment accounts are correctly titled according to your estate planning goals is crucial.

4. Beneficiary Designations

It is essential to regularly update and align beneficiary designations on accounts such as retirement plans and life insurance policies. These designations often override instructions laid out in wills and trusts, so keeping them current ensures that your investment assets are distributed according to your estate plan’s intentions.

5. Communicate Life Events and Changes with Advisors

Frequent communication between your financial advisor, tax professional and estate planning attorney can ensure that all aspects of your wealth management are aligned. These professionals can collaborate to identify potential conflicts, inefficiencies, or opportunities between your investment strategy and estate plan.

6. Regularly Review and Adjust

Both financial markets and personal circumstances change. Regular reviews of both your investment strategy and estate plan are vital. Such reviews can adapt to changes such as new tax laws, economic shifts or life events like marriage, divorce, or childbirth.

Estate planning is vital to securing your legacy and ensuring that your assets are distributed according to your wishes. By understanding these key considerations and seeking professional guidance, when necessary, you can protect your wealth, minimize potential conflicts, and provide for the financial well-being of your loved ones long after you’re gone.

About the Author – Judson Embree

Judson Embree is an Investment Advisor at Bryn Mawr Trust. He is responsible for tactical asset allocation, investment management, and economic commentary for high-net-worth individuals, families, and institutions.  He joined Bryn Mawr Trust in 2023 having previously worked as a financial advisor and trust consultant. Judson holds a Certified Trust and Fiduciary Advisor (CTFA) designation and attended Shippensburg University. He is a member of the American Bankers Association and regularly donates blood and platelets to the Miller-Keystone Blood Center.

This communication is provided by Bryn Mawr Trust for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this commentary is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice.

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