A tremendous amount of wealth will pass from aging Baby Boomers to younger generations in the next few decades and this fact is often called “The Great Wealth Transfer,” “The Silver Tsunami,” or a similar catchy-sounding name. Whatever it is called, it is said to be the largest transfer of intergenerational wealth in history.
Because no one knows exactly how long Boomers will live or how much money they’ll spend and accumulate before they pass on, it’s impossible to accurately predict just how much wealth will be transferred, but studies suggest it’s somewhere between $30 and $50 trillion.
A blessing or a curse?
Many people are talking about the benefits this asset transfer might have for younger generations and the economy, few are talking about its potential negative ramifications. According to an Ohio State University study, one third of people who received an inheritance had a negative savings within two years of getting the money. Another study by The Williams Group found that intergenerational wealth transfers often become a source of tension and dispute among family members and that 70% of such transfers fail by the time they reach the second generation.
Whether you will be inheriting or passing on this wealth, it’s crucial to have a plan in place to reduce the potentially calamitous effects such transfers can lead to. Without proper estate planning, the money and other assets that get passed on can easily become more of a curse than a blessing.
By utilizing proactive measures such as estate planning and opening lines of communication to your loved ones, you can help ward off the risks of the big wealth transfer. Here’s what we suggest:
Create a plan: It doesn’t matter how young you are or if you have a family yet, all adults over 18 should have some basic planning vehicles in place. If you have not already done so, creating an estate plan is the first step.
From there, be sure to regularly update your plan on an annual basis and immediately after major life events like marriage, births, deaths, inheritances, and divorce. We maintain a relationship with our clients long after their initial planning documents are signed and our built-in systems and processes will ensure your plan is regularly reviewed and updated throughout your lifetime.
Discuss wealth with your family early and often: Don’t put off talking about wealth with your family until you’re in retirement or nearing death. Clearly communicate with your children and grandchildren what wealth means to you and how you’d like them to use the assets they inherit when you pass away: focus on the values you want to instill, rather than what and how much they can expect to inherit. Make such discussions a regular event, so you can address different aspects of wealth and your family legacy as they grow and mature.
Remember that whether it’s saving money, charitable giving, or community service, having your kids live your values while growing up is often the best way to ensure they carry them on once you’re gone.
Communicate your wealth’s purpose: You worked hard to build your family wealth, so you’ve more than earned the right to stipulate how it gets used and managed when you’re gone. Though you can create specific terms and conditions for your wealth’s future use in planning vehicles like a living trust, don’t make your loved ones wait until you’re dead to learn exactly what you want their inheritance used for.
If you want your wealth to be used to fund your childrens’ college education, provide the down payment on their first home, or invested for their retirement, tell them so. By discussing such things while you’re still around, you can ensure your loved ones know exactly why you made the planning decisions you did.
Secure your wealth, your legacy, and your family’s future
Regardless of how much or how little wealth you plan to pass on or stand to inherit, it’s vital that you take steps to make sure that wealth is protected and put to the best use possible. As your Personal Family Lawyer®, we have unique processes and systems to help you put the proper planning tools in place to ensure the wealth that’s transferred is not only secure, but that it’s used by your loved ones in the very best way possible.
Moreover, every plan we create has built-in legacy planning services, which can greatly facilitate your ability to communicate your most treasured values, experiences, and stories with the ones you’re leaving behind. Schedule a Family Wealth Planning Session today to get started.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.