KingFish + Partners: The Great Wealth Transfer
The accumulated assets of the baby boomer generation, anticipated to transfer to surviving spouses and then eventually to the Gen X and millennial generations is 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. A personalized plan can support a smooth transfer of wealth that sets expectations and prepares beneficiaries for the future.
This wealth results from two simultaneous economic trends that began as boomers were coming of age and starting their careers: a long-term stock market run-up and home value increases. Even adjusted for inflation, today's median home price is more than double the median price in 19652, and stock market returns have averaged 10% over the past 50 years.3
Whether you are a Boomer, a Gen Xer, or a Millennial in the midst of financial planning, a financial advisor (FA) can help you broaden your view and consider everything from cash flow to tax management 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, everyone can benefit from a conversation about how money can contribute to a fuller and more meaningful life. Your discussion with a FA should center on your priorities and your vision for the future. Whether you’re focused on protecting your assets for long-term security, hope to travel extensively, or want to leave a legacy to provide opportunities for your children and grandchildren, a FA can help you develop a roadmap to reach those goals.
Another important element of financial planning is to include your partner and family members in the discussions. An estimated $54 trillion of the great wealth transfer is anticipated to move to the sole control of the surviving spouse, about $40 trillion of which will go to widowed women.1 Surviving spouses will need emotional support as well as financial 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 to steward the family legacy for the next generation so they can focus on healing.
Couples should meet with a financial advisor 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 FA.
Whether you include heirs in meetings with a FA or not, it’s important to consider family dynamics and be transparent to set appropriate expectations regarding your legacy. Inheritances are a common source of family conflict, and you don’t want your adult children to neglect their financial plan in a mistaken belief that your resources are deep enough to provide for their own retirement.
If you own a family business, these discussions should include succession planning for multigenerational ownership and estate planning for fairness to heirs in and outside of the business. A financial advisor can help outline ways to ensure the continued success of the business and prepare family members for the decisions and opportunities that may come next.
Bringing family members together to discuss goals and aspirations can strengthen relationships and understanding between generations. Many members of younger generations want to use money as a financial tool to invest in improving their communities or to support 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. Minimizing conflicts with transparency and appropriately written documents can reduce the possibility of legal challenges. You need 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 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.
Family meetings
Sharing financial information and introductions to your FA can help prepare the next generation for their current and future planning needs.
Wherever you are in your financial planning journey or whether you are a beneficiary, benefactor, or future benefactor, a meeting with a financial advisor can help you ensure you’re protecting and providing for your family.
1. https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management
2. US Census Data Median Sales Price of Houses Sold for the United States (MSPUS) | FRED | St. Louis Fed
3.https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
