Preparing For The Great Wealth Transfer

Preparing For The Great Wealth Transfer
Categorized as Estate Planning, Sterling Tax Advisors Tagged ,

Over the next decade or so, Baby Boomers will be passing on an estimated $30 trillion to $68 trillion in wealth to their Millennial adult children. This will be the most significant transfer of wealth in American history, and some believe it will create an Alpha class of big spenders. It is anticipated that the Millennials will buy up real estate, invest heavily in the market, and generally become financial consultants’ best clients. But maybe not. If you are a Boomer family of substance, now is the time to prepare for the Great Wealth Transfer to ensure your legacy accomplishes what you want.

Trends seem to indicate that the passing of Boomer wealth directly to Millennial adult children isn’t a sure thing. A common objective when planning to distribute an estate is to pass on sufficient resources to allow their children to discover what is important to them to lead purposeful lives. A great fear is a sudden wealth becomes a demotivator, and the child stops working because they no longer need to. The fact is, adult children have already found a path, and the prospect of a windfall allows them to lay back and relax.

Grandchildren, however, are a different story. They are typically younger and just starting. They could benefit from an inheritance to provide the means to try different paths until they find their best fit. Generation-skipping is becoming more and more commonplace.

Considerations For Your Estate

When you have a significant estate, it is important that you share your plans with beneficiaries and explain why you are doing what you are and using the vehicles you plan to use for distribution. It is wiser to fully explain what you are trying to do for a legacy rather than have an executor do it for you.

Perhaps the most significant uncertainty in estate planning is the lengthening lifespan of Baby Boomers. Unlike their parents, who had pensions funded with annuities and other insurance products that kept delivering until death, Boomers have relied on the stock market to fund their 401k and build a financial portfolio. That income is not guaranteed. 

What is guaranteed is the cost of healthcare and skilled nursing will go up, as will the risk of outliving your money. Insurance products can mitigate these expenses, but the time to engage them is now, not later.

Preparing Your Estate For The Great Wealth Transfer

Obviously, you will need an experienced financial advisor to help structure your estate in a fashion that will pass it on with a minimum of tax and legal liability. Irrevocable trusts are a popular method for passing on and preserving wealth while providing an income as well. There are other vehicles, but all are at risk.

With massive national debt and unbridled inflation caused by the pandemic, taxing the wealthy is taking on new political favor. Vehicles such as trusts may be disallowed in the near future. It is essential that you plan for the transfer of wealth now while favorable tax treatment exists and multiple tools are still available.

If you haven’t thoroughly thought out what your legacy should look like and how it will be executed, contact us at the William Rogers Company. Let’s set a time to flesh out exactly what your values and objectives are and construct a plan that will best fit your needs. Call 888-297-3321.