Wealth Succession

Preparing for Wealth Succession: What You Should Be Aware Of

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The commencement of the most significant wealth transfer age in history is now upon us. Over the course of the next two decades, up to $67 trillion will be transferred from the baby boomer generation (individuals born between 1946 and 1964) to their grown-up children in Generation X (individuals born between 1965 and 1980) and the millennial generation (individuals born between 1981-1996). This implies that the largest period of wealth transfer in history has commenced.

Wealth Succession

Here are the crucial measures that you can adopt to fortify your financial situation and get yourself prepared for the Great Wealth Succession and fiduciary estate management.

Educate Benefactors and Inheritors

Financial comprehension is crucial when it comes to wealth transfer to avoid costly mistakes. The individuals involved in a transfer frequently lack fundamental financial proficiency or are not familiar with the wealth transfer process.

Among the most important financial aspects that affect wealth transfer are taxes. Improper handling of taxes could lead to severe tax consequences for the beneficiary. There are tax-free methods of wealth transfer, but techniques like giving, lending to family members, or setting up a Grantor Retained Annuity Trust (GRAT) often require preparation time before the transfer.

Furthermore, your clients may be unaware of essential financial terminology or strategies. They may be ignorant of various tax evasion techniques, investment strategies, or methods of holding liquid or illiquid assets. They may not be aware of the current state of the financial markets. It is your responsibility as their financial advisor to provide them with any pertinent information when presenting a transfer plan.

Examine Your Beneficiary Designations

Regardless of what your will or trust says, the beneficiary of your insurance policies, retirement funds, and annuities will receive the proceeds when you pass away. Ensure that the designated individual is still listed correctly, as it could be someone whom you no longer want to inherit the money or, even worse, someone who has already passed away.

Set Up a Pour-Over Will and Revocable Trust

Although it may cost you a bit initially, by bypassing the probate process, it will allow your heirs to save time and protect their privacy. Instead of attempting to handle the matter on your own, consult with a qualified estate planning lawyer. You require an expert in this area because each state has its own set of unique laws.

Consider Supporting Charity and Non-Profit Organizations

The non-profit sector has been hit particularly hard by the pandemic. Charities rely heavily on fundraising events, which were abruptly cancelled, leaving many struggling to maintain their operations. If you have a cause close to your heart, there are several ways to contribute, including giving low-basis shares, charitable trusts, or donor-advised funds. Not only will you receive tax benefits, but supporting those in need will also bring a sense of fulfillment.

Review Your Real Estate Holdings

 If you are fortunate enough to own a vacation home or rental property, consider establishing a trust or family limited partnership to transfer ownership to your heirs. This structure will provide future generations with ongoing benefits, in addition to tax savings.

Each generation has their own financial goals and ways to achieve them. To learn more on where each generation is at in increasing their net worth, please see the resource below.


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