Sarah Ruef-Lindquist, JD, CTFA
By Sarah Ruef-Lindquist for Pen Bay Pilot WAVE, Spring 2024
We are in the midst of the largest intergenerational transfer of wealth in the history of the United States. It is estimated that by the year 2045, more than $84 trillion will be left to the Gen X, Millennial and Gen Z generations by the Silent Generation and Baby Boomers. This is more than at any other time in US history.[i]
The long and the short of it is that those born between 1946 and 1964 – Boomers – have created an extraordinary level of wealth that combined with what the Silent Generation left to them will result in an unprecedented amount of assets transferring by the middle of this century. Over the next 20 years or so, many who have never had to manage or plan for any level of wealth could have more than they ever imagined.
And it’s already begun. Many of the clients I work with have been ‘surprised’ to become beneficiaries of parents and other relatives’ estates and are confronted with the need to manage and steward these assets in a way that fits into their lives or in some cases, is transformational. Having never planned to have more than they needed to live on modestly brings a whole new set of challenges and decisions to be made.
For instance, some have been helped in the past during financial difficulties and want to do something for those who helped them, even if they have already paid back anything they borrowed. It’s a natural emotional response in the face of generosity, but does it make sense?
Some want to give some or even all of the money to charity…but again, is this in their best interests when having a “nest egg” is the difference between living in retirement solely on social security or having the ability to even modestly increase their standard of living in their older years?
Others are so unaccustomed to having any excess income or assets than they need to live on that they assume that they will have a significant tax bill for accepting the funds or, if they have received appreciated securities or assets, that they cannot liquidate or reinvest those securities into something more appropriate for their life goals and risk tolerance because of the capital gains tax involved when in fact, most of the time this is not the case.
For most, they have never had a financial advisor because they didn’t think they needed one. What becomes immediately apparent is that they do and will do well to find someone who can help navigate the choices and complexities of managing wealth and build the right amount of discipline around spending to fit into their lives in a way that makes the most sense for them.
A careful analysis of risk tolerance, retirement and estate planning goals in light of new circumstances is required that also takes into consideration longevity, living expenses and other assets and income sources available. Because stock, real estate or other assets held more than a year by the decedent often give heirs a tax basis that is the value as of date of death, not the basis or cost of the decedent, very tax efficient opportunities are available to allow heirs to make choices that are more aligned with their financial plans.
Anyone faced with inheriting assets should seek the services of a financial advisor with experience, knowledge and skills to help plan for and manage inherited assets. It can often mean a brighter future for you and your loved ones.
[i] https://www.forbes.com/sites/jackkelly/2023/08/09/the-great-wealth-transfer-from-baby-boomers-to-millennials-will-impact-the-job-market-and-economy/?sh=58fbb0e03e4a