Planning for a Seamless Wealth Transfer Across Generations
The assets accumulated by the baby boomer generation, anticipated to transfer via inheritance to surviving spouses and eventually to Gen X and millennial generations, are estimated to total $30 trillion by 2030 and continue to grow over the next two decades to as much as $124 trillion.1 Astronomical numbers like that may encourage the inheriting generations to overestimate their expected windfall and cause concern among boomers about how their estates are managed. Ensuring you have a personalized plan that takes into account your goals and values can help support a smooth transfer of generational wealth that sets expectations and prepares beneficiaries for the future.
Whether you are a Boomer, a Gen Xer, or a Millennial in the midst of financial planning, a financial professional (FP) can help you broaden your view and consider everything from cash flow to tax efficient strategies to insurance protection and lifetime income strategies in the context of your lifestyle and goals.
Thoughtfulness and transparency for better outcomes
While building and preserving your wealth matters in financial planning, everyone can benefit from a conversation about how money can contribute to a fuller and more meaningful life. Your discussion with a FP should center on:
- Your priorities
- Your vision for the future
- Protecting your assets through risk management strategies
- Long-term goals like travel or supporting your family
- And, the legacy you want to leave
Including your partner in these discussions is also critical. An estimated $54 trillion of the great wealth transfer is anticipated to move to the sole control of the surviving spouse via inheritance, about $40 trillion of which will go to widowed women.1 Surviving spouses will need emotional support as well as financial planning strategies and wealth management guidance to help them grow and protect the family wealth for themselves and the next generation. When plans are clear and shared, there’s less stress for widows as they take on the responsibility of stewarding the family legacy for the next generation so they can focus instead on healing.
Couples should meet with a financial professional together, and they may also want to include their children or even older grandchildren so they, too, can receive guidance and establish an ongoing relationship with a FP as they gain responsibility in managing generational wealth.
Family dynamics
Whether you include heirs in meetings with a FP or not, it’s important to consider family dynamics and set appropriate expectations regarding generational wealth and your legacy. Inheritances are a common source of family conflict, and you don’t want your adult children to neglect their own financial planning in a mistaken belief that your resources are deep enough to provide for their retirement.
Bringing family members together to discuss goals and aspirations can strengthen relationships and understanding between generations and help build financial wellness. Many members of younger generations want to use money as a financial tool to support investing in improving their communities or to further causes that are important to them, which can be a catalyst for enlightening conversations about family values as much as the family’s wealth.
Planning strategies for your wealth transfer
Whether you plan to focus on philanthropy or provide for future generations, there are a variety of potential approaches with tax implications for you and your heirs that should be addressed in your financial planning. Also, you can help minimize conflicts with transparency, and having appropriately written documents can reduce the possibility of legal challenges. Finally, be sure to keep updated documents that provide written evidence of your wishes, including a will, power of attorney, health directives, and beneficiaries.
In addition to estate planning, another option many Boomers choose is “giving while living.” Whether you set up a mechanism for regular charitable giving or provide some or all of an inheritance in the form of cash to family members, you’ll want to keep informed about changes in the tax code. Many parents and grandparents contribute to college savings funds, provide a down payment, or even purchase a home for their offspring. Others opt for multigenerational travel to strengthen family ties and create lasting memories together. No matter how you choose to use or pass along your assets, a well-thought-out and frequently reviewed financial plan is essential to the smooth transfer of generational wealth.
Wherever you are in your financial planning journey or whether you are a beneficiary, benefactor, or future benefactor, a meeting with a financial professional can help you ensure you’re protecting and providing for your family.
Source:
Please consult with your tax and/ or legal advisors with regard to your particular circumstances. This informational and educational content does not offer or constitute financial, insurance, investment, or general investment advice. Securities offered through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC. Investment advisory products and services offered through Equitable Advisors, LLC, an investment advisor registered with the SEC. Annuity and insurance products offered through Equitable Network, LLC. Equitable Network conducts business in CA as Equitable Network Insurance Agency of California, LLC, in UT as Equitable Network Insurance Agency of Utah, LLC, in PR as Equitable Network of Puerto Rico, Inc. GE- 7639680.1(2/25)(Exp.2/29)
