The Great Wealth Transfer

Over the next twenty years, there will be a wealth transfer that exceeds $30 trillion as the Baby Boomer generation passes the remainder of their wealth to the Millennials and subsequent generations.  The Baby Boomers (born 1946-1964) are considered the wealthiest generation, currently controlling 70% of all the disposable income in the United States. Its imperative families develop a plan to transfer assets since the transfer of wealth is inevitable.  For most families, the transferring wealth was acquired during this lifetime and not inherited from the previous generation.

When starting to plan for wealth transfer pre-retirees should prepare for their retirement first, healthcare costs second, and the remaining transferring assets last.

Although some individuals choose not to involve their family members that will become the beneficiaries of their assets, including qualified tax and legal professionals are important.  But don’t write off including your heirs in all aspects of wealth transfer planning if you’d like more than just one generation to benefit.

Preparing your heirs to take over your estate eventually passing their remaining assets on to their beneficiaries is equally important.  Heirs that are unprepared in managing money, investments or seeking financial guidance from qualified professionals seldom have enough inheritance left over for their heirs.  Some families choose to ‘train’ heirs by teaching how to wisely invest so they can give some away through philanthropy.  Without financial education, frequent investment decision making and a purpose to preserve the inherited wealth, many estate transfers rarely survive.  The complexities of wealth preservation are not taught in school or other institutions and can only demonstrate through modeling, professional guidance, and the generation’s intention to pass their wealth forward.

If the generation set to inherit from the Baby Boomers does a good job preserving what they inherit, it’s possible it could easily provide financial benefits to others for the next thirty to forty years.  And that’s worth planning.

As financial advisors, we spend a lot of time preparing for building wealth, but not passing it on to subsequent generations.  If you would like guidance on The Great Wealth Transfer and my working with your beneficiaries, I welcome a meeting with all of you.

7 Common Ways to Mishandle Your Inheritance and Waste Thousands of Dollars

Receiving a large sum of money through an inheritance or other windfall can be stressful, exciting, and confusing all at once. Managing a large sum of cash can seem overwhelming, particularly if it’s an experience you’ve never had before. Here are seven common inheritance mistakes and how you can best avoid them. Follow these tips and you’ll find yourself benefitting from your inheritance not just in the short-term, but for decades to come.

Spending without a plan in place

Many people who receive a large inheritance are so overwhelmed that they get right to spending. They justify each purchase by saying that it’s only a small chunk of what they received. But those small chunks add up to big portions of your sum, and before you know it you’ve depleted much of your inheritance. Try to take things slow at first, at least until you have a set plan in place.

Making big changes all at once

Large inheritances can bring about the chance for big lifestyle changes. That might mean a new, bigger house, or the ability to quit working. But we advise holding off on these decisions. A huge sum of money might seem like it will last forever at first, but that’s not always the case. Resist the urge to immediately upgrade your lifestyle all at once.

Missing out on investment opportunities

The world of investing can be strange and foreign to the unexperienced. They might feel safer just leaving their lump sum of cash in a bank where nothing can “happen to it.” But smart, carefully guided investing is a vital way to stretch out the impact of your inheritance to have a long-lasting impact on your future.

Spreading yourself too thin

Even with the best intentions, it’s easy to forget the foundation of long-term saving and investing. It can be tempting to immediately begin giving away your sum of money to children, loved ones, or even charities. But remember that you can’t take care of others long-term if you haven’t taken care of your own situation first. Plan for your own future, then begin to think about helping others with theirs.

Forgetting about the future

It might seem like your life has changed all at once. You’ve likely lost a loved one, you’ve come into a great deal of money, and you have all kinds of decisions to make. Just remember that smart planning now will lead to a stable, enjoyable life in the long-term. Don’t sacrifice lasting financial security for short term thrills or financial excitement.

Being your own financial manager

Abraham Lincoln once said that any lawyer who represents himself has a fool for a client. The same could be said for an individual who’s come into a great sum of money. When you come into a large inheritance, there are a lot of personal and emotional factors wrapped up into it. Your relationship with the deceased, your family members and friends who might benefit from some of that money, and other thoughts can affect your thinking. You need someone on your team who can be truly impartial, giving you unbiased and experienced advice to help plan for your future.

Taxes and other liabilities

There will be certain tax consequences surrounding any decision you make so you should consider how to be as tax efficient as possible. You should consider how to structure yourself for appropriate asset/liability protection. Could this money go to your spouse? Could this money get taken by creditors? Could I lose this money in a divorce?

It’s heartbreaking how often we see individuals miss out on building a lasting financial foundation for themselves because they don’t know the options available to them. It’s particularly difficult when we know that we can offer free information about investment options, saving plans and financial planning solutions.

Set up an appointment with us today so that we can learn about your situation and walk you through every solution available to you.