Understanding the Great Wealth Transfer
The Great Wealth Transfer refers to the largest intergenerational transfer of wealth in U.S. history, an estimated $124 trillion, as Baby Boomers and older generations pass assets to children, grandchildren, and charities over the coming decades.
Why This Matters for You
Many people assume estate planning is primarily about taxes. Yes, the tax implications are important because significant wealth can be lost to Uncle Sam. But this volume of inheritance is also certain to impact family harmony, honoring values and intentions of the deceased loved one, ensuring surviving spouses are protected, and minimizing administrative burdens for loved ones.
5 Things You Can Do Now to Prepare
1. Make sure yours and your elderly relatives’ estate planning documents are up to date. It’s very common for documents to remain unchanged for decades and no longer reflect a family's current circumstances. If you haven’t created or reviewed your will, trust, powers of attorney, or healthcare directives recently, now is the time.
2. Retirement accounts and life insurance policies transfer according to beneficiary forms—not necessarily according to the will. Therefore, in addition to reviewing estate planning documents, proactively assess IRAs, 401(k)s, annuities, and life insurance policies.
3. One of the biggest challenges HCM sees is that families often avoid discussing money with one another. We know this can be uncomfortable, but it’s a necessity to make sure your wishes are executed the way you prefer.
If it helps, your HCM advisor is happy to meet with you and the generations above and below you together and serve as a conversation guide.
If having such a discussion feels too unnerving, consider using the HCM Life & Legacy Guide to help you document your wishes. While the guide will give your loved ones the specifics when they need to know, letting them know the guide exists a crucial step to take.
4. A successful transfer involves educating heirs before they receive wealth. Millennials, people born between 1981 – 1996, are projected to inherit $46 trillion over the next 25 years, making them the largest beneficiary generation. Do your beneficiaries have a good grasp of budgeting and cash flow? Investing basics? Tax implications? Family values about money?
Financial literacy can be just as important as the inheritance itself. If you would like your advisor’s assistance with these conversations, we’re here to help.
5. Some families may benefit from gifting portions of wealth during their lifetime rather than waiting until death. While there may be tax implications to doing this, givers often find joy from seeing their loved ones benefit from the gift. Your HCM advisor and CPA can help you coordinate a giving strategy that is right for you.
Conclusion
The Great Wealth Transfer is not a future event; it’s already happening. For individuals and families between the ages of 50 and 80, now is an ideal time to review estate plans, update beneficiaries, communicate intentions, and prepare the next generation for stewardship. Wealth that is transferred without a plan can become a missed opportunity and a frustrating situation. Wealth that is transferred thoughtfully can become a lasting legacy.