How to navigate the ‘massive wealth transfer’, according to top advisers | Job Binary


The biggest wealth transfer in history is about to happen - here's how to be a part of it

In between Bill Gates has promised to give away his wealth “virtually.” And with Patagonia founder Yvonne Chouinard’s recent decision to donate her entire company to fight climate change, attitudes toward inherited wealth have changed.

These significant promises are happening as part of the largest generation of income in history, with baby boomers passing more than $68 trillion to their children.

“This is a generation that has amassed a greater percentage of wealth than any other generation,” said Mark Mearsberger, CPA and CEO of Dana Investment Advisors, No. 2 on this year’s CNBC FA 100 list.

“This is a great opportunity. If they don’t plan for it, they don’t have to worry about it, the government will do it for them,” he said, referring to how state inheritance laws regulate the distribution of assets without any documentation. will be in place.

More than 100 FA:

Here’s more information on CNBC’s FA 100 list of top financial advisory firms for 2022:

According to CNBC’s top financial advisors, there are four key considerations to help families prepare.

1. Life expectancy

Although the Covid-19 pandemic has reduced the average life expectancy in the US, people have been living longer, and this will determine your estate plan.

“You may need the money longer than you think,” Mearsberger said.

“Anyone in their 70s is more likely to make it to 90,” he added. “Understand that your children and grandchildren will live much longer after this.”

“In the transactions I’m doing, the kids are closer to my age — they’re probably in their 50s or 60s,” said Rick Keller, a certified financial planner and chairman of No. 33-ranked First Foundation Advisors. CNBC FA 100 List.

This makes it even more important to start working with the next generation early, he added. “It’s really important to get to know these kids and their needs,” Keller said.

2. Family inheritance

The first hurdle is often bringing generations together to discuss their family legacy, advisers say.

“A lot of wealthy parents don’t show their kids what’s out there,” said Alison Berman, president and CEO of Palisade Capital Management, which ranked No. 56 on the FA 100. However, “planning requires transparency,” he said. “We’ve helped a lot of families get through it.”

“One of the most important things is to make sure that the next generation is comfortable working with the wealth that is inherited,” Keller said. “Parents are used to managing their wealth after 20, 30 or 40 years, and children have less than a year.”

Sometimes not enough time is spent on the softer side of these family dynamics than just the numbers.

Rick Keller

Chairman of First Foundation Advisors

For starters, “we’re trying to get them to think about what it means to live well in this country,” he said. “Sometimes not enough time is spent on the softer side of these family dynamics, rather than just the numbers.”

“Financial literacy is a big part of wealth transfer,” Meersberger said. “You have to be a lifelong learner.”

He added: “The next challenge is how do you attract the next generation. You may not be able to connect with them.”

This means finding different ways to work with your successors and encouraging them to work with you. “It requires some creativity on the part of the consultants,” Meersberger added.

3. Charitable intention

Not only do children and grandchildren behave differently from their parents in terms of communication styles and technical literacy, they may also have different priorities.

“The younger generation is much more active,” Berman said. They focus on issues such as climate change, social justice and more They are environmentally and socially conscious companies, he said.

They want to use their assets as agents of change.

Alison Berman

President and CEO of Palisades Capital Management

As for their investment strategy, they are more interested in broader trends than individual stocks, he said. “They want to use their assets as agents of change.”

To maximize your charitable giving plan, there are certain strategies that can help, such as setting up a charitable remainder trust or a charitable lead trust, which allows you to make donations to organizations of your choice while providing tax benefits to your heirs.

4. Tax consequences

Will Williams, president and CEO of No. 40 David Vaughn Investments, said of course that any money given away should be done with proper estate and tax planning, using tools such as trusts and annual exclusions or lifetime exemption gifts. In the FA 100 list.

The goal is to reduce future tax liability and save much larger bills for heirs.

So far, taxpayers can gift up to 40% tax-free lifetime gifts of $12.06 million. This is above and beyond the annual exclusion for lump sum gifts, which allows you to make an unlimited number of gifts up to a certain amount ($16,000 in 2022) without incurring any tax each year.

Those who do not wish to make an outright gift may consider placing assets in an irrevocable trust. One type, a grantor-reserved annuity trust, or GRAT, provides annual payments to parents for a set period of time before the assets are passed on to children or grandchildren as tax-free gifts. In fact, the richest people in the country have used this strategy. (There are also spousal lifetime access trusts, or SLATs, which allow spouses to create an irrevocable trust for each other’s benefit while maintaining access to assets.)

“The most important thing is to understand what it means for the next generation,” Williams said, as well as what strategy will work best for you. “It’s not a one-size-fits-all thing.”



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