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Surfing The Wealth Transfer Wave

The start of 2022 marks another step toward the largest intergenerational transfer of wealth the United States has ever seen. For years economists and wealth experts have forecasted a global shift of trillions of dollars in accumulated wealth and assets, with nearly $35 trillion expected to change hands in the United States alone.

According to Federal Reserve data, the total wealth of Americans aged 70 and older equals about 27% of all United States wealth. This means that as older Americans pass on, a staggering 27% of all wealth in this country will change hands, often flowing down to younger generations. While these figures may feel abstract, they will have very tangible implications for those who stand to inherit that wealth. As both the Silent Generation (those born between 1928-1945) and Baby Boomers (those born between 1946-1964) decline in numbers, younger generations will be faced with the challenge of managing the blessing, and sometimes welcomed burden, of inheritance.

This wealth transfer wave brings with it challenges for younger generations, namely Generation X (those born between 1965-1980) and Millennials (those born between 1981-1995), who stand to inherit a majority of this transferred wealth over the next two decades. In this newsletter, we highlight three steps Gen Xers and Millennials can take to prepare for and protect an inheritance they may receive.

Create A Trust & Durable Power Of Attorney

Inheriting assets that have not been left to you in a properly constructed trust created by your parents or grandparents could leave that inheritance exposed to lawsuits.  In addition, if you were to get divorced your soon to be ex spouse may assert a claim against those assets.  Gen Xers and Millennials can encourage their parents and grandparents to create revocable living trusts so that any inheritance is passed down in continuing trusts (rather than going to you outright and not in trust) for increased asset protection.

Gen Xers and Millennials that receive an inheritance should create their own trusts.  This means that their family members will not need to endure the grueling California probate process.  It also ensures that you have control over who will inherit your assets.

Although a trust allows the creator to name a Successor Trustee to manage trust assets, a trust alone isn’t enough to cover non-trust assets. Certain assets, such as retirement accounts, are rarely transferred into a trust, and thus the Successor Trustee will not have authority to manage those assets in the event of an emergency. This is why in addition to a trust, Gen Xers and Millennials should create a Durable Power of Attorney and encourage family members to do the same. A Durable Power of Attorney will help ensure a trusted person is named to step in and manage assets outside a trust.

Plan For Business Succession

During the 21st century so far we have seen a continued rise in startup and business ventures among younger, budding entrepreneurs. But regardless of age, all entrepreneurs must consider the idea of business succession planning. Business succession planning generally refers to planning for scenarios where you are no longer able to run your own business, including after you have passed. This includes planning successor management, outlining future business goals, and determining family participation in the business, if any.

Members of the Baby Boomer generation who have already established their own businesses should consider business succession planning as part of their estate planning – part of building their legacy.  Millennials and Gen Xers, however, need to understand business succession from two angles: first, how they may be impacted or asked to participate if their parent owns a business, and second, as it relates to any startup or business ventures of their own. Having a plan in place to ensure successful management and operation of your business is crucial for business owners of all generations.

Consider Working With A Financial Advisor

Work With A Financial Advisor Weiner Law

No matter how large or small an inheritance is relative to your current assets, receiving a chunk of money at once can be stressful if you don’t know how to put it to good use. Financial advisors can help you to project future cash flow needs and, based on your risk profile, recommend investments accordingly.  Hiring a professional can help maximize your use and enjoyment of your inheritance.

Please feel free to contact us to discuss how best to protect your family’s assets and avoid conflict down the road.

About Daniel Weiner

Daniel Weiner is a US and UK licensed attorney, based in San Diego, who provides trust administration and estate planning services to families and individuals across California. Dan guides his clients through the often confusing maze of financial and legal decisions to create plans that ensure the well-being of their families and the accomplishment of cherished family goals.


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