Much has been written about the impending intergenerational wealth transfer—with more than $30 trillion expected to be passed down from baby boomer parents to their GenX and millennial heirs over the next three decades.1 Yet nearly half (46 percent) of all family heads have yet to engage in any inheritance conversation with their future heirs.2 High-profile estates that have been delayed or disputed or ended up in probate have include those of the Rev. Martin Luther King Jr. and Pablo Picasso. Even Howard Hughes lacked a will at the time of his death.
Certainly, family financial conversations can be difficult. What’s more, you should keep in mind that it’s not merely assets you should be striving to pass on to the next generation; it’s also your core financial values and legacy, with which you have hopefully prepared your children and grandchildren to be fiscally responsible, empathetic and charitable adults.
Fortunately, your trusted advisor can play an invaluable role in facilitating the effective and efficient transfer of your wealth, and opening the dialogue between you and your heirs.
ESTABLISH AN ESTATE PLAN.
Estate-planning tends to be delayed because people assume estate plans are for the ultra-wealthy; or else they don’t want to think about their mortality. It is important for almost everyone to establish an estate plan or risk leaving their heirs with significant problems along with their legacies.
Think about specific concerns or special considerations, like any children you may have from a previous marriage whom you want to be sure to provide for, or perhaps that one child of yours who is in financial hardship while another is stable. There are many common estate-planning challenges that a well-versed financial advisor can help you navigate.
BE SURE TO CONSOLIDATE ACCOUNTS, PROPERLY TITLE ASSETS AND KEEP ADEQUATE RECORDS. ALSO REVIEW BENEFICIARY DESIGNATIONS.
Maintain an inventory of your overall estate, and consider consolidating your investment and bank accounts. Consolidation will mean fewer account statements, less paperwork for heirs and fewer administration fees to the estate. It is important to review your primary and contingent beneficiaries to ensure that the disposition of your financial assets reflects your wishes as stated in your estate documents.
APPOINT A RELIABLE EXECUTOR AND SUCCESSOR EXECUTOR.
The executor’s role is to administer your estate after your death. But, how well does this individual comprehend financial matters? What if you change your mind about the way you want your assets distributed—can you easily communicate those wishes to that person? It’s critical to review your appointed estate fiduciaries as your life and circumstances change.
BE SURE TO CONSIDER ASSETS THAT SHOULD BE SPENT AND GIFTED DURING LIFE.
Work with your advisor to understand how the various components of your estate will pass down, and avoid the common mistake of leaving assets after your death that may increase the future tax due from your heirs. There may be certain assets you should spend down during your lifetime and assets that should remain in the family (i.e., legacy assets).
As in many aspects of life, children tend to mirror their parents’ behavior when it comes to financial matters. So, strive to be thoughtful, open and honest about your inheritance plans, expectations and hopes for the future.
Take time now (long before the challenges of wealth fall into their lap) to introduce the next generation’s members to your trusted financial advisor so they can gain a deeper financial education, awareness and preparedness. And look to your advisor to quarterback and collaboratively work with your attorney and accountant. Together, these professionals can help ensure that your wishes are carefully followed and that your heirs will be well prepared.
1 “The Greater Wealth Transfer,” Accenture, December 2015.
2 UBS Investor Watch Survey, 2015.
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