Passing Your Estate to The Next Generation

Is there a tax-smart way to pass my estate onto the next generation that doesn’t cost a fortune or risk my Financial Security and Independence???

I have been asked this question countless times by successful family business owners and have learned that there is a great deal to unpack when wrestling with this question.?

According to Cerulli Associates in Boston (2022 projection report) there is an estimated $84 Trillion that is projected to be transferred from the baby boomer generation by 2045. That’s a lot of money.?

Of that amount, it is estimated that $19 Trillion will be taken from this to pay estate taxes. That leaves an estimated $12 Trillion to charities and $53 Trillion actually being transferred to beneficiaries. But is this actually the case for beneficiaries??

With all the research and studies that have been done, it is difficult to understand why no one has thought of asking another important question.? How much of this wealth will be unintentionally directed to estate litigation??

Although taxes may seem like an unnecessary burden to successful wealth creators, a thriving economy requires tax revenue to provide ongoing services to its citizens.? We may not agree with “how” this money is deployed; however, it is the reality of today’s society and cannot be avoided.? Eroding one’s hard-earned wealth due to estate litigation is both unnecessary and something that can be avoided.?

Let’s consider the following points:?

1. Longevity Risk. ?Life expectancy is continuing to extend beyond age 80 with more and more individuals living to age 100.? This factor needs to be taken into account before giving money away to children.?

1. What is your Financial Independence Number and then calculate again.? When calculating your financial security and independence needs ensure that the assumptions are conservative and review them regularly to consider factors like changing tax legislation and inflation.?

1. Excess Wealth. Only when you have determined that there is excess wealth is the concept of wealth transfer a consideration.?

1. Draw up a will(s).? Having a well-drawn-up will ensures that your estate is not ravaged by unnecessary taxes, court costs and delays.??

1. Prepare your family.? Does your family have the financial fluency to handle money? If not, it is never too late to ensure they are prepared if vast sums of money are being gifted to the next generation.?

1. Communicate, communicate and communicate. Review the contents of your will with your family members.? Remember, designing any estate plan means that this is comprised of your wealth and it is your decision as to what you intend to do with it.? This includes factors like charitable giving, special needs and estate equalization.? Open communication ensures there are no misunderstandings among your family that can lead to conflict and estate litigation.? Legal fees can significantly erode the value of an estate and delay the distribution of assets.? Often these delays take years and the funds are lying stagnant and often depreciating.?

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Holidays often spur families to give to others and reflect on one’s life. Perhaps now is the ideal time to dust off your financial plan and begin to review its relevancy and sustainability for your own financial security and independence and that of your loved ones.?

Ensuring a sound financial and estate plan that provides more than money requires deep thought, noteworthy reflection and someone to ask the right questions.? Be realistic and reflective as to what you want to achieve in your life with your wealth. If you have excess wealth, make sure your wishes are followed by having them recorded. And most of all, take the time to discuss your thoughts, values and wishes with your family. No one is a mind reader and often we forget that in order to leave an intentional legacy for our loved ones, it is only you, the wealth builder, who can take the necessary steps to gift or transfer your estate effectively, with confidence, clarity and purpose.