When you think about your Estate Plan and leaving your children or grandchildren assets in your Will or Trust, your immediate concerns may be focused on personal items such as your house, car, or property, as well as bank accounts. However, one area that you will want to put considerable thought into is your investments, as they have a large potential for growth and can be a great gift to bequeath to your loved ones.
The challenge with inheritance is that it is often a more intangible type of asset, especially if you are an angel investor. If you find yourself feeling frustrated when trying to determine how best to pass on investments to your loved ones, you are not alone. Needless to say, you will want to be sure that you do not let any frustration or confusion over Estate terms prohibit you from understanding how to include your angel investments in your Estate Plan.
At Trust & Will, our easily accessible online platform helps simplify the estate planning process. However, we are not stopping there, as we want to make sure that each of your individual estate planning needs is addressed. Keep reading to learn more about what an angel investor is, plus several steps you can take to begin safeguarding your assets for your heirs:
What are angel investments?
Before learning tips on how to protect your angel investments, it is important to understand what is classified as an angel investment. Angel investment is a term used for investments that are made on startup companies, which are companies still in the beginning stages of their business. They are labeled angel investments because an investor, typically a high-net-worth individual or group of individuals, becomes the perceived “angel” of a company because they chose to invest in its growth by providing funds and resources needed to scale the company. This investment opportunity is often in exchange for some agreed-upon percentage of ownership equity in the company. Angel investors are many times sought out as a primary source of funding for many startups.
With all investments there exists an element of risk associated with the decision to invest. However, investing in startup companies carries an even greater level of risk, as there is no true way to know whether or not a seemingly new and promising company is going to succeed. Yet, with this higher level of risk, there is also the potential for a greater level of profit in the future, which is a profit that an angel investor may one day be able to pass on to their children or grandchildren.
Now that you better understand the concept of angel investments, and can determine whether or not you classify as an angel investor, you will also want to know the strategic tips you can implement to ensure that your angel investments are passed on to your loved ones.
Keep thorough records
One of the most important tips you will want to keep in mind is the value and importance of keeping thorough records of all documents and financials related to your angel investments. Angel investments are usually riskier than other investments and you often do not see return on investments for years to come, you may not have an excessive paper trail of statements documenting your investment profits starting out. This makes it that much more crucial that you keep thorough records of your angel investments from the beginning so that your children and grandchildren have evidence of your investments after you pass. This will also simplify the inheritance process for your loved ones who will be entitled to the benefits of your angel investments after you have passed.
Seek advice from your financial advisor
If you are someone who frequently makes angel investments, it is likely that you have a trusted financial advisor that you rely on for support and advice on all of your financial decisions. Like the rest of your financial decisions, it will be important to go over your angel investments with your financial advisor. They will have experience and knowledge of your personal finances and be able to provide you with trusted advice on how best to go about passing on your investments to your loved ones.
Consider putting your angel investments in a trust
A common and trusted way to pass on your angel investments within your Estate Plan is through a Trust, which is when you enter into a legal relationship with another individual, known as your Trustee, who becomes responsible for any aspect of your Estate. By putting your angel investments into a Trust, you are able to pass your investments on seamlessly to your Beneficiaries, as the legal documents are already in place to ensure the smooth transfer after your passing. This will allow your children and grandchildren to bypass the tedious probate court process, which can often become costly and time-consuming.
Additionally, another benefit of leaving your angel investments in a Trust is that you are able to maintain ownership of your investments until you pass away, as you can name yourself as the Trustee of the assets and your children or grandchildren as the Beneficiary. This will allow you to continue making decisions regarding your angel investments while you are alive.
With Trust & Will, including your angel investments in your Estate Plan does not have to be challenging or frustrating. We’re here to help you keep things simple. You can create a fully customizable, state-specific Estate Plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning options today!
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