Prepare your Family for the Greatest Wealth Transfer in History.
By 2045, it’s estimated that US households will transfer $84Trillion in wealth (Cerulli). Take steps now to preserve the assets you’ve worked hard to acquire and ensure your family is equipped to build on a foundation of financial stability.
Reduce unnecessary tax burdens.
One strategy for reducing your potential estate tax liability is to take advantage of the annual gift tax exclusion. For 2023, an individual can gift up to $17,000 to a recipient without having to file a gift tax return (married couples can gift up to $34,000). This exclusion is per recipient so a married couple could gift $34,000 to as many recipients as they’d like during the 2023 tax year, and still meet the annual gift tax exclusion. In addition to the annual gift tax exclusion, the lifetime gift tax exemption has continued to climb and is $12.92 million per individual for 2023, $24.12 million for married couples filing jointly.
Take advantage while you can.
Effective January 1, 2026, these higher limits are set to sunset, and the lifetime cap will be reduced to $5 million per individual ($10 million per married couple). By gifting during your lifetime, you can remove assets from your taxable estate, which in turn reduces the taxable burden on your heirs.
Ensure your family’s future generations are equipped with an adequate financial IQ.
In a study of high-net-worth families, it was found almost 70% of family wealth is lost by the 2nd generation and nearly 90% is lost by the 3rd generation (TheWilliamsGroup). A critical step in securing your financial legacy is ensuring your beneficiaries and family business successors are equipped to manage wealth.
For an effective business transition, start planning at least five years in advance and bring your successors into the discussions early. Don’t assume the next generation wants what you want. One strategy is to position the business as an option and not an obligation, so they have time to be fully prepared to follow in your footsteps. Ultimately do what’s best for your business and your family.
Don’t let your loved one fall victim. Elder financial abuse, including elder financial exploitation, affects at least 10 percent of adults over age 60 each year in the US (DOJ). In 2019, millions of older adults lost more than $3 billion to financial fraud (FinCen). Widows/Widowers are targets for financial exploitation due to their accumulated savings and inheritance, in addition to the reliance on others for physical well-being and financial management. Include your spouse in financial discussions now, to strengthen their financial literacy and ensure she or he is prepared for the future.
Have a multi-generational estate plan in place.
Utilize trusts as a valuable strategy to provide financial protections and tax advantages for your estate and your heirs. In addition to protecting assets from estate taxes, trusts allow assets to pass to multi-generations while avoiding probate court and in some cases creditors. Trusts can include cash, investments, real estate, and businesses.
Incorporate the entire family’s tolerance for risk and liquidity needs into your generational wealth strategy rather than using just your own. Investments in accounts designed for future generations may be more aggressive than in accounts earmarked for your spouse’s retirement. If you’re leaving real estate to your heirs, such as a vacation home, consider providing a means to cover property tax.
Involving your successors and beneficiaries in financial planning decisions establishes a lasting financial legacy that includes multi-generational wealth for your family.