Many Americans with significant assets do not consider themselves wealthy. Yet, when surveyed, a vast majority desire to transfer their assets to heirs and charitable interests at their death. Retirees may be surprised by the growth of their investment assets and even those with modest assets can transfer them to future generations.
Reinvestment of income and compounding are remarkable principles, leading to the gain of well-managed portfolios of securities and real estate, over time. Educating your heirs regarding the value of keeping assets invested and allowing them to grow can lead to generational wealth. The LIMRA Secure Retirement Institute indicates that more than $7 trillion will be transferred to Baby Boomers, Generation X, and Millennials in just the next few years. Over the next 20 years, it is estimated that $30 trillion will transfer from Baby Boomers to successor generations.
Communication and Education
Estate owners, making wise decisions, can transfer assets that can produce income for future generations. Frequently, when an individual receives a significant inheritance, without prior communication and education, the inherited assets may be quickly consumed. Americans who have accumulated assets including securities portfolios, real estate, and business interests rely on these assets to provide income in their retirement years, without depleting principal. Good planning and communication with your heirs, may provide a path for them to use income only from inherited assets, allowing the principal to remain intact, possibly for successor generations. Educating your heirs regarding the specific assets that you own, why you own them, and how you envision these assets continuing to benefit them, can play a critical role in your heirs safeguarding their inheritance.
Many successful estate owners enlist professionals including financial advisors, estate attorneys, and tax advisors to assist them in growing and protecting wealth. A professional financial advisor will help provide strategic financial planning, investment management, and advice that is significant in the process of growing and preserving assets. Estate attorneys and tax professionals are key to protecting assets with appropriate documents to preserve and transfer wealth while minimizing the loss of assets to taxation. Using various types of trusts may allow assets to remain intact longer for the benefit of heirs and reduce the decisions that need to be made immediately following an estate owner’s death. Please be sure to consult your financial professional regarding your unique situation.
Involving your heirs in meetings with your professional advisors is a valuable next step to provide them with education regarding your objectives, better equip them to manage assets for you in the event of your incapacity and prepare them for inheriting your assets. “Money may be the husk of many things, but not the kernel; It brings you food, but not appetite; medicine, but not health; acquaintances, but not friends; servants, but not faithfulness; days of joy, but not peace and happiness.” — Henrik Ibsen.
Instilling future generations with moral values, desire to improve themselves, investing in their education, and a desire to help others may equip them with a healthy respect for the appropriate use of any inheritance they may receive. Generational wealth will pale in comparison to the legacy of our generational values.
Kevin Kingston, CLU, is managing director and financial adviser at Savant Wealth Management; savantwealth.com