Wealth Transfer

In the coming decades, we’re set to witness one of the most significant financial shifts in history: The Great Generational Wealth Transfer. Indeed, Gen-Xers and Millennials stand to inherit nearly $73 trillion in assets over the next 20 years, according to Cerulli Associates.

Yet this transfer isn’t just about figures in a bank account; it’s about ensuring each generation is equipped with the right tools and knowledge to preserve their wealth long term. For Baby Boomers, it’s a matter of effective estate planning, whereas, for Gen-Xers and Millennials, it’s about understanding and carefully managing the assets they expect to gain.

In this blog article, we’ll explore the importance of The Great Generational Wealth Transfer and how Baby Boomers, Gen-Xers, and Millennials can prepare accordingly.

Baby Boomers: Today’s Wealth Holders

According to The New York Times, Baby Boomers currently hold about half of the nation’s $140 trillion in family wealth. While a portion of this wealth is likely to go to charity as members of this generation pass, Boomers are expected to transfer most of their assets to their Gen-X and Millennial children.

Yet even though most parents of this generation plan to leave their children some form of inheritance, Edelman recently reported that only 37% say they currently have a wealth transfer plan in place. Thus, if you’re a Baby Boomer who expects to transfer part or all your assets to the next generation, your focus should be on comprehensive estate planning.

It’s important to note that a last will and testament alone may not be sufficient in achieving your wealth transfer goals. You may also want to consider leveraging trusts and other tax-smart strategies to preserve more of your wealth as it passes from generation to generation.

Examples of Tax-Smart Wealth Transfer Strategies

  • Revocable Living Trust. A revocable trust allows you, the grantor, to maintain control over the trust assets during your lifetime. You can alter, amend, or revoke the trust entirely if you wish. Upon your death, the trust’s assets bypass the probate process, allowing for a more expeditious distribution to your beneficiaries.
  • Irrevocable Trust. Unlike a revocable trust, once you establish an irrevocable trust, you generally can’t alter or revoke it. However, these trusts can offer significant tax advantages, as any assets you transfer to an irrevocable trust typically removes them from your estate.
  • Charitable Remainder Trust (CRT): A CRT provides an income stream to either you or your named beneficiaries for a specified term, after which the remaining assets go to a charity of your choice. These trusts can also offer tax benefits, including a charitable income tax deduction.
  • Charitable Lead Trust (CLT). The inverse of a CRT, a CLT provides an income stream to a charity for a specified term, after which the remaining assets go to your designated beneficiaries.
  • Grantor Retained Annuity Trust (GRAT). With a GRAT, you transfer assets to a trust and receive an annuity payment for a specified term. If you survive the term, the remaining assets go to your beneficiaries, often with tax advantages.
  • Strategic Gifting. In 2023, individuals can gift up to $17,000 per recipient without triggering the gift tax. By making systematic annual gifts to your heirs, you can gradually decrease the size of your taxable estate, thereby reducing your potential future estate tax.

While this isn’t a comprehensive list of tax-efficient wealth transfer strategies, it can help you understand the types of estate planning moves available to you. An estate planning attorney or fiduciary financial planner like Benchmark Wealth Management can help you identify the right strategies to achieve your goals.

Open Communication Is Key

Also, keep in mind that effective estate planning isn’t just about tax efficiency. It’s also about open and honest communication with your heirs.

By discussing your values and objectives as well as their inheritance expectations, you may be able to prevent misunderstandings and conflicts down the road. In addition, these conversations can foster a sense of responsibility and stewardship in the next generation, potentially preserving your hard-earned wealth longer.

Gen-Xers: The Sandwich Generation

As the children of elder Baby Boomers, many Gen-Xers stand to inherit significant wealth, potentially altering their financial trajectories. Since Gen-Xers often find themselves sandwiched between the responsibilities of caring for aging parents and supporting their own children, this sudden wealth can be both a boon and a challenge.

Indeed, the intricacies of managing substantial assets are vast and varied. Without the right guidance, it can be easy to make costly missteps.

If you’re a Gen-Xer who stands to inherit significant wealth, now is the time to start assembling your financial dream team. A fiduciary financial planner, estate planning attorney, and tax expert can help you prepare for your inheritance and manage it responsibly, so you can maximize your newfound wealth.

This may mean determining how to allocate funds for your children’s education, planning for your own retirement, or deciding on investment strategies that reflect your values and long-term goals.

Meanwhile, sudden wealth can also affect your own wealth transfer objectives. If you don’t have an estate plan, be sure to consult an attorney or trusted financial planner to ensure you have the right strategies and documents in place. Furthermore, make sure you review and update your estate plan regularly to ensure it reflects your financial circumstances and goals.

Lastly, waiting until you inherit wealth can lead to reactive decision-making, which might not always be in your best interest. By being proactive—educating yourself, seeking expert guidance, and planning strategically—you can position yourself to manage your newfound wealth effectively and use it in ways that best support your life goals.

Millennials: Waiting on Wealth

Due to longer life expectancies and many Baby Boomers retiring later in life, Millennials who stand to inherit wealth from their parents may have a long wait ahead of them. Nevertheless, members of this generation may benefit greatly from The Great Generational Wealth Transfer.

As you wait on your inheritance, use this time to improve your financial literacy and position yourself for future financial success. From online courses to financial podcasts and blogs, there’s no shortage of avenues to enhance your understanding of personal financial management.

In addition, focus on creating a robust financial foundation now, whether that means boosting your emergency savings, contributing to retirement accounts, or simply living within your means. By taking steps to shore up your personal finances, you can ensure you can handle any potential future inheritance responsibly.

Finally, while money remains a taboo topic for many families, fostering open conversations about finances with your parents can be transformative. These discussions can help demystify your family’s financial status, provide insights into your potential inheritance, and even offer lessons from previous generations’ successes and mistakes.

Most importantly, honest communication can help strengthen family bonds, ensuring that when the transfer of wealth takes place, it’s a collaborative and understood process.

Benchmark Wealth Management Can Help Your Family Prepare for The Great Generational Wealth Transfer

The Great Generational Wealth Transfer is more than just a financial shift; it’s a testament to the legacies families can leave behind. For all generations, careful planning and open communication are essential. By arming yourself with knowledge, seeking professional advice, and fostering open conversations, you’ll be in a better position to preserve your family’s legacy for generations to come.

Remember, you don’t have to navigate this journey on your own. Benchmark Wealth Management has the expertise and resources to help you prepare for The Great Generational Wealth Transfer, whether you’re transferring wealth or stand to inherit it. To learn more about how we help our clients achieve their financial goals and reduce financial stress, please contact us. We’d love to hear from you.


About Rick

Richard W. Stout III is managing director of Benchmark Wealth Management, LLC, with 25 years of experience in the financial industry. He specializes in financial planning and asset management for individuals, families, and institutions seeking to build and monitor durable and sustainable plans for their financial futures. Rick is a Certified Financial Planner™ professional and holds the Accredited Investment Fiduciary® (AIF®) designation. He obtained his MBA from Rensselaer Polytechnic Institute and his BA in Economics and Anthropology from the University of Connecticut. Rick has earned a Master of Science degree in Personal Financial Planning from the College for Financial Planning. He has extensive background experience in lending, credit review and analysis, and real estate and partnership management. Learn more about Rick by connecting with him on LinkedIn.

About Thomas

Thomas J. Britt is managing director of Benchmark Wealth Management, LLC, with 23 years of experience in the financial industry. He specializes in executive financial planning, retirement planning, investing, as well as the management of trusts and endowments. Thomas is a CERTIFIED FINANCIAL PLANNER™ professional. He holds the Master Planner Advanced StudiesSM, MPAS®, Certified Investment Management Analyst® (CIMA®), and Chartered Retirement Planning Counselor℠, CRPC® designations. Thomas earned a Bachelor of Science in Finance from the University of New Haven, an MBA in financial technology from Rensselaer Polytechnic Institute, and a Master of Science in Personal Financial Planning from the College for Financial Planning. He is also a proud veteran of the United States Navy Submarine Force. Learn more about Tom by connecting with him on LinkedIn.

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