Ways to Prepare for Wealth Transfer to the Next Generation

By Charles O. Posnecker IV, CFA, CFP®, CTFA | Published: April 2021

An estimated $60 trillion is expected to be transferred from baby boomers to their heirs in the coming years. Accordingly, it is always important to meet with a financial advisor to ensure that the “great wealth transfer” is a smooth one for you and your loved ones. The more proactive you are, the more likely you are to achieve your goals of reducing taxes, giving to charity, and the list goes on.

Here are six basic steps you need to know about ‘passing on your legacy.’

Review any beneficiary designations
Despite what your will or trust may say, whoever is the named beneficiary of your retirement accounts, insurance policies, and annuities will receive the proceeds at your passing. This could be someone you no longer wish to inherit the funds – or worse yet, someone who may have already passed on – so check to see that you still have the intended person correctly noted.

Establish a revocable trust and pour-over will
While this may cost you a bit on the front end, it will help your heirs save time and preserve your privacy by avoiding the probate process. It’s also best to seek qualified advice from an estate planning attorney rather than trying to do it yourself. Each state has its specific rules, so this is where you want an expert in the field.

Look into 529 college savings plans
Your grandchildren have a long time horizon ahead of them and the tax-free growth of 529 plans is a great way to help them when they start preparing for college. And if college is not in their future, funds can be used for trade or vocational schools. 529 plans are also flexible in that you can change the beneficiary at a later time to a different family member.

Consider charities and non-profit foundations
The pandemic year hit non-profits especially hard. Charities rely heavily on fundraising events that were shut down entirely and unexpectedly. If there are causes near and dear to your heart, options include gifting low-basis stock, charitable trusts, and donor-advised funds. Not only will you reap the tax benefits, you will feel better helping those in need.

Have a look at real estate
If you are fortunate enough to own a vacation home or rental property, explore setting up a trust or family limited partnership to transfer interest to heirs. In addition to the tax breaks, the structure will carry on for future generations to benefit.

Choose someone you trust
Have the conversation with someone you trust about what you want to happen with your valuables. Ideally this is someone objective that would not be conflicted by family issues. And this person may not always be who you think, such as a spouse. Work together with them to itemize your inventory, list any debts, and take notes.

There are many wealth transfer strategies that can be implemented, but the right ones depend on your goals and objectives. The sooner you begin, the better off you are. If you do not yet have these in place, it is not too late to meet with an advisor to discuss how they can help.

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About the Author – Charles O. Posnecker IV, CFA, CFP^®, CTFA
Chuck Posnecker joined Cypress Capital Management in 2017 after working for Christiana Trust, a division of WSFS Bank, for 12 years in their personal trust and investment groups. He graduated from the University of Nevada, Las Vegas, where he received his BSBA in International Business (2002) and MBA-Finance concentration (2005). Chuck is also a graduate of the Pennsylvania Bankers Association School of Trust, Investments & Relationship Management, where he completed a three-year program focused on various aspects of trust administration and investments. Chuck obtained his Certified Trust & Financial Advisor designation in 2011, his Chartered Financial Analyst designation in 2016 and earned the CFP^® certification in 2019.

 

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