How You Can Prepare for “The Great Wealth Transfer”
Some call it “The Great Wealth Transfer.” Others use the buzzword, “Silver Tsunami.” But each of these catchphrases refers to the fact that we are in the midst of the largest transfer of intergenerational wealth in history.
The "Baby Boomer" generation (people born just after the end of World War II through to 1964) are estimated to pass more than $68 trillion to younger generations in the next few decades. This wealth transfer will inevitably change lives (for better or worse), generate an incredible amount in taxes, and require a great deal of preparation. Are you ready?
Is Your Family Prepared?
While most people are talking about the advantages of this transfer for heirs and the economy, fewer are talking about the potential negative ramifications. Yet there’s plenty of evidence suggesting that many people, especially younger generations, are woefully unprepared to handle such an inheritance.
In fact, an Ohio State University study found that 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 conflict among family members, and 70% of such transfers fail by the time they reach the second generation.
Regardless of whether you’ll be the one passing on wealth or inheriting it, you must have a well-prepared estate plan in place to prevent the potentially disastrous losses and other negative outcomes such transfers can lead to. Without proper planning, the money and other assets that get passed on can easily become more of a curse than a blessing for you and your loved ones.
Proactive Planning is Key
There are a number of proactive measures you can take to help reduce the risks posed by the coming wealth transfer. Beyond putting in place a comprehensive estate plan that’s regularly updated, openly discussing your values and legacy with your loved ones can be a key way to ensure your estate planning strategies work exactly as you intend. Here’s what we suggest:
01 - Create Your Own Estate Plan
If you haven’t created your own estate plan yet—and far too many of you haven’t—it’s essential that you put a plan in place as soon as possible. It doesn’t matter how young you are, how much wealth you have, or if you have any children yet - all adults over age 18 should have some basic estate planning vehicles in place.
From there, be sure to regularly review your plan - especially after major life events like marriage, births, deaths, inheritances, and divorce. Unlike traditional estate planning professionals, when you work with Cedar Counsel, we maintain a relationship with you long after your initial estate planning documents are signed.
Indeed, our Life & Legacy Planning Process features proprietary systems designed to ensure your estate plan is regularly reviewed and updated over your lifetime, so you don’t need to worry about overlooking anything, as your family, the law, and your assets change over time. Be sure to ask us more about these systems.
02 - Talk about Wealth With Your Family Early and Often
Don’t put off talking about wealth with your family until you are in retirement or nearing death. As soon as possible, clearly communicate with your children, grandchildren, and other heirs what wealth means to you and how you’d like them to use the assets they inherit. Make such discussions a regular event, so you can address different aspects of wealth with your family as the younger generations grow and mature.
With everyone heading home for the summer, right now is the ideal time to have this discussion. If you feel anxious or uncomfortable talking about wealth with your family, reach out to us and ask for our help. We have processes and systems specifically designed to support you in having these delicate conversations, with far more ease than you trying to do everything on your own. We can even facilitate these discussions with your loved ones, if that’s something you are interested in.
And when you do have the conversation with your loved ones, focus the discussion on the values you want to instill, rather than what and how much they can expect to inherit. Let them know what values are most important to you, and try to mirror those values in your family life as much as possible. Whether it’s saving money, charitable giving, or community service, having your loved ones see you live your most important values is often the best way to ensure they carry those values on once you are no longer around.
03 - Discuss Your Wealth’s Purpose
Outside of clearly communicating your values, you should also discuss the specific purpose you want your wealth to serve in your loved ones’ lives. 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. While you can add specific terms and conditions for your wealth’s future use in estate planning vehicles like trusts, don’t make your loved ones wait until you’re dead to learn how you want their inheritance used.
If you want your wealth to be used to fund your children’s college education, provide the down payment on their first home, or invest for their retirement, tell them so. By discussing how you would like to see their inheritance used while you are still around, you can make certain your loved ones know why you made the estate planning decisions you did. And having these conversations now can greatly reduce future conflict and confusion among your family about what your true wishes really are when you are no longer able to explain your wishes.
A Trusted, Lifelong Guide For You And Your Family
No matter how much, or how little, wealth you plan to pass on—or stand to inherit—it’s critical that you take action now to make sure that wealth is secure and offers the maximum benefit to your family. As your trusted advisor, our Life & Legacy Planning Process is designed to ensure the wealth that’s transferred is not only protected, but that it’s used by your loved ones in the very best way possible.
Moreover, every estate plan we create features a built-in legacy planning process, which ensures you can communicate your most treasured values, lessons, and life stories to those you leave behind. That’s why we call our services Life & Legacy Planning, not just estate planning. These intangible assets form the foundation of your family legacy, and they are often what we value most of all when it comes to our inheritance. Unfortunately, most estate planning lawyers focus little, if any, attention on such assets.
But we are not like most estate planning lawyers. We will serve as your trusted, lifelong guide to ensure you make a lifetime of wise, forward-thinking choices for yourself and those you love most. And we will offer your loved ones the support they need to make the most important legal and financial decisions when you are no longer there to guide them. With our expert, caring counsel, you can rest easy knowing that the coming wealth transfer will offer you and your loved ones the most benefit possible, with the least amount of risk. Schedule your visit with us to get your Life & Legacy Plan started today.
This article is a service of Cedar Counsel. 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.