In the United States, the Great Wealth Transfer has already begun for many families, but it is not expected to conclude until around 2045. As such, many people are still planning for the future impact this monumental shift will have.
The Great Wealth Transfer refers to the estimated $84 trillion that baby boomers are expected to pass on to future generations. Most of those who will inherit this substantial sum will be millennials or older members of Generation X, though younger generations, such as Gen Z grandchildren, could also benefit.
Family communication
One key issue financial experts have highlighted is that many families have not yet started discussing how this transfer will take place. Open communication is critical, as it can reduce the likelihood of disputes and help set realistic expectations about how wealth will be divided.
However, it’s not just about having conversations. Families also need to create comprehensive estate plans to provide clear guidance.
For instance, business owners should consider developing a business succession plan if they intend to pass their company to the next generation. When it comes to personal estates, drafting a will is essential, but it may not be enough. Large financial sums can be placed in trusts, which can distribute the funds to younger family members over time. Trusts are especially important for minors, as they often cannot directly inherit wealth. A trust can hold assets until the beneficiary turns 18 or provide instructions for a trustee to manage the funds and make distributions as needed.
Planning for the future
With $84 trillion set to change hands, the wealth transfer process will undoubtedly be complex. Planning ahead can ensure this transition goes smoothly. It’s important to explore all the legal and financial options available to you.