Death & Taxes
As the saying goes, there are two things we can always count on: Death and Taxes.
By 2050 roughly $16 trillion dollars will pass from boomers to their “babies”. This is the largest transfer of wealth in history. Passing assets to the next generation always comes with concerns. For many people, there are benefits to gifting assets during their lifetime and managing any tax consequences themselves, rather than leaving that burden to their family.
Aside from simply allowing both generations to enjoy the results of the transfer (for one without the obvious unpleasantness of dying, and for the other not having to attach the loss of a parent or grandparent to a sudden windfall), there can be financial benefits to providing a “living inheritance”. Regardless, in most cases the true motivations remain the same as a traditional inheritance: you want the next generation to have it easier than you did, and to continue to provide for those you love.
Of course, every decision has implications that can be both positive and negative for the giver and the recipient. Stats show that 70% of families lose their wealth by the second generation, and 90% by the third. Part of this can be attributed to a lack of preparation and information sharing when it comes to finances. Up to 64% of wealthy families have fallen into the time-honoured pattern of not talking about money. This can be hugely detrimental to developing sound financial management strategies in the next generation and can lead to disastrous consequences, regardless of how the assets are passed on.*
The best way to prepare your heirs is to start conversations early on. Talk about wealth and what it means in an all-encompassing way; explain the responsibilities that come along with managing the finances of a family; and discuss ways to seek out professional advice to implement a plan to protect and, perhaps even grow their assets. Two easy steps to start this process are to openly discuss your estate plans with your heirs, and make sure they have an opportunity to meet your trusted advisors before they are in the difficult position of having to make serious decisions that will impact your, and their, legacy.
For advice on how to start these conversations, contact your Assante Advisor.
*Source: Time Magazine, June 2015
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