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Are You Ready for the Great Wealth Transfer?

Tiffany L. Kuntemeier

March 12, 2020

Between now and 2030, an enormous amount of money will pass from baby boomers to their heirs, with estimates varying from about $15 trillion up to a staggering $68 trillion.

So are the implications. While there’s no crystal ball to tell us what will happen with the economy, tax law, employment figures, or the political landscape, the fact is that the money is going to move, and it will be the largest wealth transfer in history.

Planning Opportunities

The Great Wealth Transfer provides opportunities for personal, family, and business planning. For example:

Estate planning: If nothing in this world is certain except death and taxes, a good estate plan helps you deal with both.

Under the Tax Cut and Jobs Act (TCJA), the gift and estate tax exemption, also known as the exclusion amount, increased to almost $11.6 million per person, more than double the amount under the prior law. This high limit caused many business owners to forego estate planning, assuming the high exclusion negated the need to plan.

But estate planning shouldn’t only be about money. It should be about your goals and vision.

For example, do you want to pass your wealth on to future generations? If so, how much? Are there family members with special needs who should be given accommodations for support? Would trusts make sense given your financial circumstances?

Don’t assume an estate plan will be moot because of the high exemption amount. A thorough estate plan gives you—and your heirs—a roadmap for the future.

Succession planning: What’s your plan for your business? Wealth transfer and succession planning are often linked. If your children are interested and capable of taking over leadership, start grooming them now for more responsibility and accountability. Also, talk to your tax advisor about how to pass on ownership in the most tax-advantaged way.

If the children are not candidates for leadership, you have many choices. You can sell the business to a third party or management team or set up an employee stock ownership plan (ESOP). Or, you can hire a CEO or COO to manage the company for you after you retire.

The key is to not let your company lose value due to lack of planning. Your business is likely your most valuable asset, and you must continue to invest in it so that it will serve the needs of you and your family’s future.

Generational planning: What do you envision for your family’s future? If your children are in their 20s or 30s, helping them buy a house or start a business might be a wonderful way to transfer some of your wealth. Children in their 40s and 50s might appreciate your assistance with college expenses for your grandchildren.

If your youngest is 60+, why wait to pass your wealth along? Transfer assets now so your adult children can enjoy them. And if you have children who might need specific assistance due to health or other issues, set up trusts now.

Philanthropic planning: What will your legacy be? Perhaps you’ve always wanted to give a big gift to your alma mater or a favorite charity. Depending on your circumstances, it might make sense to establish a private foundation, donations to which can be a great tax-planning tool. Discussing your philanthropic plans with your financial advisor will ensure that you meet your goals.

The most successful people look to the future. You can’t take your wealth with you, so don’t wait to plan for your own great wealth transfer.

Our team can help you plan for the future. Contact us today to discuss next steps.

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