Ever thought about what you would do if you suddenly received a financial windfall — potentially hundreds of thousands of dollars you didn’t have before? When you picture it now, does the idea excite you, make you anxious, or a bit of both?
For many people, this scenario will become a reality in the years ahead. In what’s being called the “Great Wealth Transfer,” nearly $124 trillion in assets (cash, investments, real estate, etc.) is expected to move from Baby Boomers and older Americans to Gen X, Millennial, and (some) Gen Z households through 2048. Financial experts are calling it the most significant intergenerational transfer of wealth in history.
This immense shift has implications for givers and receivers, and we’re already seeing both sides of the coin here at Curio Wealth. That’s an encouraging sign, because it means some families are proactively taking steps to shape a positive experience. Yet without thoughtful planning, the outcome could just as easily go sideways.
If you’re not quite there yet, now is an ideal time to start. Keep reading for some compelling reasons to start thinking about and planning for a potential wealth transfer to or from loved ones during your lifetime.
On the receiving end? Be prepared for change.
Roughly half of Americans say they expect to receive some kind of inheritance in the next decade. If you’re one of them, you might already be imagining how you’ll use it (or you might just be pushing those thoughts aside until the day comes when you’ll have to deal with the money or the assets directly).
In our meetings with clients, we often hear from parents who want to preserve assets with the goal of passing them along to children in careers that are personally fulfilling yet have low earning potential. Others may have seen a child go through a particularly difficult challenge that derailed savings, and many just want to make sure their children have a cushion.
These inheritances have a profound impact on people’s lives. Recipients face new decisions about saving and spending, and their day-to-day money habits may change. But it also reshapes how they think about work and allows for new, long-term plans for life: possibilities they never imagined or seriously considered.
If you’re a beneficiary who is new to wealth, you can expect to encounter similar challenges. In the past, you may have had limited ability to spend, work felt nonnegotiable, and your focus was on reaching a specific financial goal. Once the inheritance arrives and that goal is suddenly met, you may find yourself with enough resources to make different choices or change your life in meaningful ways.
For some people, that new reality becomes a struggle. Some dramatically change their lifestyle; others act as if nothing has changed and avoid making any adjustments at all. The experience affects people in different ways, and it is often intensely emotional.
Aside from the emotional aspect, receiving unexpected money also adds complexity to your financial situation. That alone calls for thoughtful planning. As recent research highlights, intergenerational wealth can easily be lost to “quiet choices” such as the absence of disciplined investing and inefficiencies in tax management.
Disciplined investing is especially hard today, as many younger Americans now turn to social media for financial advice. Traditional platforms like news media are not necessarily better; the real problem is the sheer number of competing voices. We live in an era of constant information bombardment, and everything you see, hear, or do seems tied to the markets. Add the surge of notifications and pop-ups on your devices and you have the ingredients of a perfect storm. Filtering through all the opinions, many shared by people marketing products, makes it challenging to discern what’s right for you.
This overload of choices is a major hurdle for people, making the guidance of a skilled financial advisor invaluable. An advisor helps you cut through the noise and craft a clear financial strategy that aligns with your goals, ensuring you stay disciplined in following through.
Are you the giver? Put a plan in place now.
Wealth transfer can be a very complicated event without the right legal documents in place. (Frankly, even with the right documents it’s a challenge!) Used in a process known as estate planning, these documents typically include a will or a trust, a power of attorney, a living will, and a medical directive. Together, they specify how you want your assets to be passed down to future generations. Without them, state laws come into play, triggering rules that must be followed before your wealth can be transferred.
Unfortunately, only about a third of Americans have these essential plans in place.
Yes, it’s tough to think about your own demise. But it’s essential to make plans. Without them, your children will have to work overtime navigating courts, attorneys, and state regulations to gain access to your money. Even once they have authority, banks often require additional documentation, making the whole process lengthy, complicated, and stressful for your loved ones.
Having the right estate plan in place ultimately can save your beneficiaries significant money by avoiding hefty attorneys’ fees. It can also reduce frustration and tensions within the family after your passing. Loved ones may already be under considerable stress from challenging health care or caregiving situations; that stress is compounded upon your death. Leaving them with complicated estate issues to untangle makes things even harder.
Once your estate planning documents are in place, your task changes and becomes one of updating the plan.
For example, we have seen difficult situations arise when both parents pass away within a short time of one another. After the first parent dies, transfers need to be made, beneficiaries need to be updated, and documents should be reviewed. If it’s not done in time (before the passing of the second parent) this could leave assets in limbo with no clear plan. It can also trigger probate, requiring court and attorney involvement. You can see why it’s imperative to keep your estate plan current.
Are you prepared for the Great Wealth Transfer?
Whether you’re on the giving or the receiving end, now is the time to take proactive steps to ensure a smooth transfer.
If you’re a future recipient, educating yourself on financial basics and money management strategies is vital. There are numerous excellent financial podcasts, blogs, and books available on these topics, including our own Curio Podcasts and Curated Curiosity blog. You can also explore the world of financial advising to learn more about what advisors do and how they can help. Building a connection with an advisor today means you’ll have guidance ready when you need it.
If you’ll be transferring wealth in the years to come, prioritize creating and updating your estate planning documents. It’s also important to communicate those plans to your heirs, even if it feels uncomfortable. And if you don’t have a financial advisor already, consider engaging one with tax expertise who can help you create a cohesive, tax-efficient plan to maximize your legacy for heirs, charities, or others.
If you have any questions, feel free to reach out to us at Curio Wealth!
