Both givers and receivers need to be strategic about communicating when it comes to estate planning and wealth transfer, John Vandergriff emphasizes in a Kiplinger article. On the other hand, he notes, “The reality is that not everyone wants their children to know about their financial situation or their distribution of assets in the same way.”
With the largest wealth transfer in history taking place over the next couple of decades, as Boomers transfer an estimated $124 trillion in assets to younger generations, there is reason for concern. Studies show that 70% of families lose their wealth by the second generation, and an astonishing 90% lose it by the third generation.
At Geyer Law, we know about givers and receivers when it comes to Indiana estate planning. While inter-generational discussions can be awkward and emotion-laden, our attorneys not only provide personalized counsel, but do our best to facilitate family conferences and inter-generational conversations. As John Vandergriff so aptly states, “Communication is key with the next generation”.
Some moves he offers for parents to consider:
- Gift funds annually while still living.
- Think about “tax buckets” when deciding which asset to direct to which recipients.
- Consider Roth conversions now, because inherited Roth funds have a tax-free “life” after the person who funded the IRA dies.
Some concepts Vandergriff suggests recipients might consider (not only after their parents’ death, but as part of the inter-generational planning discussion), include the following:
- If you’re in a position to retire early at age 54, but you can’t touch your 401(k) without penalty until age 59½, take funds you’re forced to take from an inheritance to bridge the gap until you get to a point where you can access retirement money.
- If you inherit a home or other real estate and sell it immediately, there won’t be taxes due, based on the current rules of stepped-up cost basis..
- As a future heir, start thinking now how an inheritance can “plug gaps” in your own financial situation – shoring up emergency funds, helping you pay off your mortgage or other debt, enabling an earlier retirement.
“If you don’t know you’re going to get it, or what you plan to do with it, Vandergriff cautions the potential inheritors, “the money tends to disappear very quickly.”
Having advised Indiana estate planning and elder law clients over the past quarter century, at Geyer Law, we absolutely agree with John Vandergriff’s summation:
“The more communication you have and the more buy-in from the kids, the better it will be for everyone.”
– by Rebecca W. Geyer
