Boomer to Generation X Wealth Transfer

According to a report from Cerulli and Associates, Baby Boomers will transfer approximately $68 trillion in assets to their heirs or charitable organizations in the next quarter century. Most of that money will end up in the hands of Gen Xers, making that generation the wealthiest in the nation by the end of that 25-year period.

That large wealth shift is a byproduct of the graying of America and an emerging understanding of new ways to grow wealth after retirement. It’s a transfer rich with opportunities for both the seniors who wish to leave a meaningful legacy and the younger generation looking to optimize the resources entrusted to them. Following are some key principles for both groups to give those dollars the most impact:

Give Money to Heirs Before Death

Gifting portions of an inheritance before the individual dies has several advantages. First of all, such gifts are tax-free, whereas money that comes through an inheritance can be hit with heavy tax burdens. Additionally, those who opt to give their estates away while they are still alive have the benefit of witnessing the opportunities their money can create for their loved ones. The IRS limits such wealth transfers to $15,000 per recipient per year, so the method is limited for those with large estates.

Understand the Different Needs

Because Baby Boomers and Generation Xers have disparate priorities, a trusted financial advisor can help navigate a transfer of resources in a way that will best serve the needs of both the giver and the recipient. As Patrick Kiger wrote on the AARP website in November 2018, “Boomers are shifting from accumulating assets to spending in retirement while focusing on passing along their wealth. Many in Generation X, by contrast, are entering their primary earning years and are planning for their children’s education. “

Create a Comprehensive Legacy Plan

For many people planning to pass on their wealth, charitable and educational giving are important pieces of the puzzle. To make sure your wishes are carried out and your resources are in position to make the kind of impact you have envisioned, create a detailed estate plan with your financial advisor. Your advocate might recommend the establishment of a trust to earmark your wealth for a certain purpose, control when it can be accessed and keep your estate out of the costly and time-consuming probate court process.

Preserve and Grow Your Estate by Reducing Retirement Costs

As lifespans become longer and the expenses associated with retirement mushroom, seniors who wish to leave a legacy must take measures to make sure they still have an estate to pass on after they die. In some cases, this long-term planning might involve purchasing long-term care insurance, while other individuals might grow their wealth with diversified investments. Another option, one that can shed unnecessary expenses and grow wealth at the same time, is a life settlement. Often seniors are carrying life insurance policies that no longer meet their needs, and if they qualify for a settlement they can exchange that liability for an asset–a cash windfall that will help pay for retirement expenses and increase the value of an estate down the road.

Healthy, Ongoing Communication Between Estate Holders and Heirs

Both Baby Boomers and Gen Xers stand to benefit from this historic transfer of wealth, but when the older generation and the younger one are on the same page those resources will be in a position to do the most good and pass on a legacy of strong relationships and careful planning. The children, and even grandchildren, of seniors should make sure they are informed about the wishes of their loved ones and the particulars of the estate, and older Americans should likewise consult with their heirs when making major financial decisions.

For seniors who have worked hard and saved well, an informed transfer of wealth can help ensure a legacy that far outlives the giver. As a large portion of America’s wealth is redistributed and the younger generations seek to make the most of their new financial opportunities, trusted advisors, armed with information about vehicles like life settlements, will help support those on both ends of this pending great wealth shift.

*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.