Whether it’s called “The Great Wealth Transfer,” “The Silver Tsunami,” or some other catchy sounding name, a large amount of wealth will pass from Baby Boomers to younger generations in the next few decades. It’s estimated to be the largest transfer of intergenerational wealth in history.
It’s impossible to accurately predict just how much wealth will be transferred, but studies suggest it’s somewhere between $30 and $90 trillion.
A blessing or a curse?
The first thing that comes to mind might be the many benefits this wealth transfer could have for younger generations and the economy, but few are considering the potential negative ramifications. There’s evidence suggesting that many people, especially those in younger generations, are unprepared to handle an inheritance.
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 potential loss or other negative outcomes that transfers can lead to. Without proper planning, the money and other assets that get passed on can become more of a curse than a blessing for you and your loved ones.
Proactive planning is the key
There are several of proactive measures you can take to help reduce the risks posed by the coming wealth transfer. Here’s what we suggest:
01 - Create your own estate plan
If you haven’t created your own estate plan yet, consider putting a plan in place. 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.
Keeping your plan updated on an annual basis and immediately after major life events like marriage, births, deaths, inheritances, and divorce is often overlooked. We can help you keep your plans up-to-date, as our relationship with you does not end once your initial estate planning documents are signed.
Our firm uses a system approach designed to help you regularly review your estate plan to keep it updated over your lifetime, so as the inevitable change of your family, the law, and your assets occurs over time, you won't have any added worries.
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. Clear communication with your children, grandchildren, and other heirs about what your wealth means to you and how you’d like them to use the assets they inherit is invaluable.
With everyone gathered together for the holiday season, right now is a good time to have this discussion. If you feel anxious or uncomfortable talking about wealth with your family, reach out to us. We can support you in having these delicate conversations.
These conversations can focus on the values that are most important to you and that you want to instill, rather than what and how much they can expect to inherit.
Whether it’s saving money, charitable giving, or community service, discussions with your loved ones about your values is often the best way to ensure they carry them on.
03 - Discuss your wealth’s purpose
Along with clearly communicating your values, discussing the specific purpose you want your wealth to serve in your loved ones’ lives is also important. Your wealth is yours to determine 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, loved ones often appreciate learning how you want their inheritance used while you are still alive.
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. 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 around.
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—consider taking action now to make sure that wealth is secure and offers the maximum benefit to your family.
Our planning process is designed so that your wealth that is transferred is not only protected but that is also used by your loved ones in a responsible possible.
As we enter 2023, consider evaluating your estate plan. Feeling relieved that the transfer of your wealth will be successful and prevent conflict is a great way to kick off the new year. At Rayboun Winegardner, we can serve as your trusted guide to help you make wise, forward-thinking choices for yourself and those you love most. We offer your loved ones the support they need to make important legal and financial decisions when you are no longer there to discuss them.