After years of hard working hard to amass wealth, property or assets, the next question which is usually on the minds of most people is how and who to pass it on to. Whether its cash, homes, vehicles or other assets, value is ever changing and choosing what the right assets that would either appreciate in value or maintain a stable value is definitely what any predecessor should want for their successors. Willing the wrong or highly complicated assets can have your next-of-kin at risk of loss or stuck in a financial nightmare quickly than they have to celebrate their new found wealth or properties.
On that note, here are five assets you definitely should not will to an heir:
- Complex Derivates
These financial contracts are valued based on an underlying asset or group of assets which are liable to price fluctuations that would in turn affect the value of the derivatives. Willing derivatives such as contracts, forwards, swaps, options etc. to a successor who has poor knowledge on these types of securities could have them losing significantly as such assets are often difficult to understand, especially if your financial expertise on these sorts of assets were never taught or transferred to your successor to prepare them ahead of time. It is advisable to convert and simplify such investment before transferring them to a loved one.
- Treasured items
These could be a range of items or collectibles such as art or antiques whose value may be more sentimental than financial. As per the former, your heir may not share your sentiments about the item and thus may not value it as much as you do. In the latter case, the demand and thus the value of such items may be limited depending on a variety of factors that could have your once treasured items sitting around like a random piece of junk or discarded all together. In order to will items like these to loved ones, you must be certain that they share as much love for such items as you do or that such items carry value that can be liquidated.
- High maintenance Real Estate
This may seem like an unlikely option to grace the list but as much as real estate can be a great asset to inherit or leave behind to someone you love, certain types of real estate could be a huge financial burden for a successor. An important factor to note when passing down real estate is; the more valuable they are, the more it costs to maintain them. Inheriting a mansion or an estate can be a huge status boost for someone who probably lived in an apartment building prior or owned a much smaller property. However, they would quickly come to realize that the cost to maintain such large properties takes a toll if they do not have a commensurate amount of money in the bank to be able to manage such real estate, in which case, the only option would be to sell in distress, sadly such sales would rake in a significantly less value than the property’s true worth.
- Digital Assets
Due to the high volatility of cryptocurrency assets, willing them to a loved one may not necessarily be a good call, no matter how much value they may have had at a certain point, it may not carry the same value after a while which could lead to a huge and instantaneous loss if the assets are not converted to fiat in time.
- Unstructured Businesses
There are multiple angles to consider as to why this could be a risk to hand over to a success, on one hand is the subject of interest; handing over a business to a loved one which they have no passion or skill for is a clear sign that such a business would likely suffer neglect unless put under the management of someone more skilled or passionate whilst maintaining full ownership rights. On the other hand is the subject of willing a business that is already in jeopardy due to poor structure, poor leadership or poor succession plans or even technological advancements that may affect the longevity of a business.
The bottom line when it comes to figuring out what assets to hand down is to simplify your investment portfolio to a level that would be easily managed by an heir or improve their financial literacy by offering in depth education on your investments and how to manage them. Conversely, it is advised that assets are converted to more simplified forms which are commensurate with the financial literacy of the successor to avoid losses in the future.