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Strategies for Generational Wealth Transfer

15 June 2021

If you’ve been successful in accumulating financial resources, you may want to leave some of your wealth to family members to help provide for their futures. Transferring your wealth to family members may afford them financial opportunities they would not have without your generosity. However, a genuinely effective intergenerational transfer of wealth requires the design and implementation of an individually-tailored, comprehensive strategy. 

Each person’s financial situation is as unique as their fingerprints – what works for one family may not make sense for the next. Developing a financial plan that protects your family and your wealth is essential, but getting started can be daunting. Whatever the intricacies of your financial situation, consulting with a financial professional who listens to you and implements a plan tailored to your needs is the best way to ensure the effectiveness of your wealth-transfer strategy.

How can you create generational wealth?

Any valuable asset can be passed down to your heirs to provide generational wealth. Such assets commonly consist of cash, bonds, stocks and mutual fund investments, personal property such as cars and artwork, real estate, or equity in a business. Obviously, with such a variety of assets potentially in play, generational wealth transfers can become quite complex. Arranging for a seamless transfer of your wealth is essential – not only to preserve the worth of your assets, but to ensure your heirs are prepared to manage the wealth they will inherit, and minimize the taxes you will pay. 

America is steadily approaching the largest generational wealth transfer in our nation’s history, as the “silver tsunami” approaches. Baby boomers – those born between 1946 and 1964 – are retiring at astonishing rates. The Pew Research Center estimates that 40 million baby boomers have retired as of the end of 2020, with almost 5% of all baby boomers retiring in 2020 – more than twice as many as in any year since 2011. A significant portion of their wealth may be transferred to their children and grandchildren, particularly via qualified retirement assets. With the impending effects of this significant shift bound to reverberate throughout society, it is now essential to determine the best strategies for managing and transferring your wealth.  

Importance of Proper Financial Planning for Wealth Transfers 

Life is unpredictable, and anyone’s circumstances can change dramatically. If your financial plan is not both well-designed and set firmly in place, you may be risking more than you realize. Without proper planning and management, your valuable assets are may start declining, which can lead to financial anxiety for you. 

Having an expertly crafted plan for transferring your wealth helps to mitigate unnecessary income tax and estate tax liabilities. Moreover, being proactive and inclusive in this process can protect your family from lengthy court battles, during which the value of assets can be severely depleted. 

Handling the transfer of your wealth requires time and commitment, and, while it’s never too late to get started, the sooner the better. Rivers are easiest to cross at their source. 

Some questions to consider when planning include:

  • What is the total value of your assets?
  • How much annual income do you think you will need once you retire?
  • Are you charitably inclined? Do you want to leave some of your assets to charities you support?
  • If you own or partner in a business, is it securely structured to provide liquidity to you?


If you choose to transfer some of your wealth to family members, you should consider discussing your structured plan with them once it is in place. You may even want to leave them detailed instructions on how to handle your money.

Basic Starting Points for Generational Wealth Transfer

Creating a Trust

Trusts can provide grantors with safe and flexible ways to hold and pass along valuable assets. Depending on its purpose and design, a trust can shield assets from certain tax liabilities while the value of the assets held in the trust continues to grow. Some popular types of trusts used for generational wealth transfer include:

  • Dynasty Trusts
  • Grantor Trusts
  • Marital Bypass Trusts
  • Charitable Trusts

 

To create a trust for your family, consult with a CPA as well as an estate attorney to help you determine which type of trust is most appropriate for you, which assets to include in your trust, how to choose trustees and beneficiaries strategically, and when and how to distribute the assets.

Annual Gift Giving

Another way to transfer your wealth to family members is through yearly gifting. For the tax year  2021, individuals can give up to $15,000 to anyone they choose without incurring gift tax liabilities, and there is no limit on the number of people to whom this amount can be gifted annually.

In addition, an individual can gift more than the standard $15,000 amount without incurring gift taxes, provided the funds are used to cover certain qualifying expenses, such as tuition or medical expenses if these are paid directly to the respective institutions. Consultation with a financial professional is critical to help you understand and navigate the potential tax implications associated with gift-giving for generational wealth transfers. 

Currently, the estate exclusion is $11.7 million per individual, meaning that a married couple can effectively gift a total of $23.4 million without incurring any estate or gift tax liability. This exemption is likely to be reduced under the current administration, and changes may be made retroactive to April 28, 2021, so we recommend you begin your estate planning as soon as possible

Roth IRA Conversions

If you have a traditional IRA which a) you are not currently making contributions to, or b) holds assets you don’t think you will use in your lifetime, you may want to consider converting a portion or all of its funds to a Roth IRA. While you will be liable for income tax on the entire amount of the assets you convert to a Roth IRA, once converted those assets can currently appreciate tax-free, and be distributed tax-free to the stated beneficiaries as well, without your having to take required minimum distributions during your lifetime. Timing is key here; the specifics of your individual financial situation will determine whether – and when – this option is right for you.  

Simplifying Your Wealth Transfer Strategy with Rigby Financial Group

Though generational wealth transfers can be overwhelming to organize, it’s something you should prioritize to ensure that you and your family get the best use of your hard-earned assets, and it’s crucial to remember that because every person’s financial situation is unique, the best strategies will vary from person to person, and from family to family. 

It is particularly important to address your wealth transfer strategy now, as there are current proposals to significantly change the calculation of income taxes, estate and gift taxes, and capital gains taxes. Though some of the proposals may not become law in their current form, it’s very likely that there will be significant changes to the capital gains tax rate, estate exclusions, gifting, and other wealth transfer strategies. Therefore, it’s a good idea to take steps now to plan for securing your assets and reducing your tax liabilities. 

If you aren’t sure what strategies are most appropriate for your family and circumstances, let Rigby Financial Group help. Our experienced team of financial professionals will help you develop and implement the most effective strategies to steward your wealth for yourself and your heirs. Call or connect with us today to begin mapping the best path for your family to navigate the road toward a successful generational transfer of your wealth.

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