Pass The Cash? The Great Wealth Transfer
The great wealth transfer is underway, with trillions upon trillions of dollars headed from Baby Boomers to younger generations. Though that doesn’t mean big trust funds for one and all, even a modest cash boost from one generation to the next in a family can be life changing. Having financial intel and the ability to make sound choices can also be game changing, so it’s wise for families to pave the way for inheritances with financial education and role modeling.
Financial Know How
Say a family has socked away $35k for a grandchild. Properly saved, or invested, that’s a very sweet nest egg, right? But what if it is used on a few random splurges and then the bank account’s back to zero. Not good right? Of course, more money, saved and invested even more wisely, means a sweeter and sweeter nest egg, which is why, at Kiplinger, Leslie Gillin Bohner offers this sage advice to families:
Don’t just pass down the cash. Families need to prepare their heirs through communication and with financial know-how, or all that money could end up causing confusion, conflict and costly mistakes…. Families who believe they’ve completed their estate plans once the technicalities, such as documents, valuations and tax strategies are in place, might be overlooking critical risks.Without further steps, heirs might face confusion, conflict or costly mistakes. Those who go further to invest in communication, education and shared purpose might avoid common pitfalls and turn inheritance into a lasting legacy. One of the most powerful ways to protect family wealth is to prepare heirs before they inherit. Families who wait until death to hand down responsibility often leave heirs without the experience or judgment needed to manage wealth wisely.By contrast, sharing wealth — and decision-making — during your lifetime creates a controlled environment for learning, growth and risk reduction.
Start While You’re Living
According to Gillin Bohner, among the most important ways we can pass solid financial intel–and behavior—forward to the next generation, is to intentionally involve young people in family finance decisions early on, while time is on our side. Of course careful and thorough estate planning, most likely anchored by a will and a trust, is also essential, but preparation of the next gen is key to the ultimate realization of familial financial goals, and these tips from Bohner will help:
- Make lifetime gifts part of your wealth plan. Instead of waiting for a full inheritance, gifting a manageable amount of cash or stock allows heirs to practice stewardship.
- In family businesses, small equity stakes help the next generation learn operational and governance responsibilities, reducing the risk of disruption later.
- Tie transfers to life milestones. Linking wealth to achievements such as graduating college, landing a first job or completing financial training provides natural opportunities to build maturity.
- Involve heirs in philanthropic decisions early. Giving younger family members the responsibility to allocate charitable funds teaches disciplined decision-making and values alignment….
- Schedule regular family meetings. These create a cadence of transparency and engagement. Reviewing investments, charitable goals or business strategies together keeps the family aligned….
- Create a mission statement or legacy letter. Explaining the “why” behind the plan gives heirs context and a shared philosophy, helping them make decisions that honor the family’s intentions….
Transparent Communication
When it comes to family harmony, estate planning and financial experts underscore the role of transparent communication about money, intentions and rationale, and point out that unspoken assumptions, plans or expectations about asset distribution are at the root of most post-death conflicts. As Philip Galanes wisely observes in The New York Times, it’s especially key for adult children to understand the rationale behind estate plans, when a decision may be perceived as unusual or unfair: “To children — even adult children — gifts from parents are often received as symbols of love. And that’s why transparency is important here: to ensure that even if your bequests…vary in amount, none of the children misinterpret your gifts as statements of greater or lesser love.”
Another aspect of estate planning that helps ensure arrangements ultimately proceed smoothly, is the careful selection of the fiduciary. When a will anchors an estate plan, this designee is usually referred to as the executor; when a trust is involved, the fiduciary is referred to as a trustee. In both cases, the chosen fiduciary has a legal responsibility to the estate and its beneficiaries. Given these significant responsibilities, a type of bond, referred to as a fiduciary bond or an estate bond, is often required. Essentially, estate bonds serve as a guarantee that duties will be carried out in accordance with the law and in the best interests of the estate and its beneficiaries. As a leading national provider of estate, and all kinds of fiduciary bonds, Colonial Surety Company makes it easy and speedy to obtain them. Simply: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.
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