Preparing for Wealth Transfers to Next-Generation Members | Wealth Transfer

In the next three to four decades, approximately $30 trillion is expected to transfer from the Baby Boomer generation to their heirs in the United States. However, only 70 percent of wealth transfers are expected to be successful. A successful wealth transfer is when the benefactor’s wishes are kept. In other words, the wealth they leave behind to their loved ones are true to their will. The main cause of failure in wealth transfer are familial issues. On top of this, only 35 percent of heirs are prepared to inherit this wealth. It is crucial that inheritors are prepared for the transfer of this wealth. As a financial advisor, it is also crucial that you begin this conversation with your clients and their friends and family early.

How to Prepare Your Client’s Inheritors for the Transfer of Wealth

Taxes. Most heirs are not aware of the taxes that come along with wealth transferring. They should be aware that most wealth transfers are taxed. With individual recipients, the taxes are typically higher. Wealth transfers to charities, however, tend to not be taxed. It is crucial that heirs are made aware of these tax implications.

Educate your client’s family on their finances (with permission). Although your clients may be uncomfortable sharing their personal finances, it will help their heirs determine how to handle your client’s estates or assets once they are gone. If they are aware of how your clients want to run their estates, it avoids confusion down the line.

Incorporate heirs in the planning process. Incorporate your client’s heirs on the division of your estate. This will prevent conflict within the family. It also allows every individual’s voice to be heard. Use this time to plan your client’s family mission statement, as well.

Organize their financial documents. No one wants their family to be running to find your financial documents once you are gone. It is crucial that you advise your clients to have these documents kept in a secure location. Remind them to notify their heirs of this location, as well.

Create a relationship between yourself and your client’s family. Forming this relationship early on can provide family members a resource. If the transfer of wealth becomes too complicated, as a financial advisor you can assist with the process. You can also establish the responsibilities family members will assume once the wealth has been transferred.

Hire a family advisor. This is different from your role as a financial advisor. Rather, family advisors will assist heirs in organizing their wealth. Rather than allow heirs to spend extravagantly, they will advise  inheritors to use their money wisely. They will encourage the use of the money to eliminate debt, add to their emergency funds, for higher education, or for home repairs. In other words, the family advisor will advise families to maintain their normal lifestyle. This can provide reassurance to your clients once you are gone.

Wealth transferring does not have to fail. If you have prepared a will and your heirs are aware of the process, the transfer of wealth will be successful. Remember, a strong family bond can ease this process.

Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist in determining how health decisions impact one’s future and what to consider when financial planning.

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