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How to Create a Generational Wealth Transfer Plan Thumbnail

How to Create a Generational Wealth Transfer Plan

By: Anthony Santoro, Esq.

You’ve probably heard the saying “you can’t take it with you.” It’s a reminder that no matter how much we care about accumulating wealth, none of it comes with us at the end of our lifetime.

This is why formulating family and generational wealth transfer strategies is so important. Without proper planning, your wealth may not be transferred to your beneficiaries or charitable causes as you intend. Even worse, your beneficiaries might end up paying heavy estate taxes on the inheritance that could have been avoided with proper planning.

The Great Wealth Transfer

It’s estimated that up to $68 trillion will be transferred from baby boomers to members of Generation X and Millennials over the next couple of decades — the largest generational transfer of wealth in our nation’s history. This makes it even more important to plan generational wealth transfer strategies now.

The first step in generational wealth transfer planning is to identify your legacy goals and objectives. Most people want the bulk of their wealth to pass on to family members (such as children and grandchildren), charitable bequests or both. You and your spouse should talk about your wishes and desires for your financial legacy. 

For example, is there a family business that you want to pass on to the next generation? Are there charitable organizations you’d like to support? Or do you want to pass on wealth in a way that ensures your children don’t get a “silver spoon” inheritance and learn to earn a living on their own?

Also make sure your beneficiaries understand the values and purpose that have been important to you throughout your lifetime. These include social, economic, and philanthropic values. Communicate clearly to them your expectations for how you expect your values to be carried on after you’re gone.

Three Things to Remember

Here are a few considerations to keep in mind as you work together with your advisors to create a generational wealth transfer plan:

1. Start with a last will and testament. This is the most basic wealth transfer step, but it’s surprising how many wealthy individuals die without a will. Prince, Aretha Franklin, Bob Marley and Jimi Hendrix are a few high-profile entertainers who died intestate, leading to battles among family members over their estates that lasted for years.

If your estate is relatively large and complex, you should probably hire an estate planning attorney to draft a will for you instead of doing it yourself online. Then choose a family member or close friend to serve as your executor or designate a corporate executor for your estate.

2. Utilize Trusts. A trust is a legal document that details how your assets will be managed for the benefit of someone else. You will define the terms of the trust and name the beneficiary or beneficiaries, who will receive trust assets according to the conditions you set. Trusts can be revocable or irrevocable. 

Trusts can be used to accomplish a wide range of wealth transfer objectives. For example, a grantor retained annuity trust (or GRAT) lets you transfer assets into a trust and receive annuity payments during your lifetime. Any remaining assets are then transferred to heirs after you die free of federal and state gift taxes.

A charitable remainder trust (CRT) lets you transfer assets to charities you want to support in a tax-advantaged manner. Other trusts that might be useful include charitable lead trusts (CLTs), intentionally defective grantor trusts (IDGTs), spousal lifetime access trusts (SLATs) and irrevocable life insurance trusts (ILITs).

3. Plan for estate taxes. If your estate is (or will be) large, you should plan for ways to reduce or eliminate estate taxes. The current estate tax exemption of $12.92 million (as of 2023), or $25.84 million for married couples, is scheduled to drop in half to about $6 million, or $12 million for married couples, at the end of 2025. This could ensnare many more families in the estate tax trap.

Gifting is one way to reduce or eliminate the estate tax burden on your beneficiaries. Using the annual gift exclusion, you and your spouse can each give away up to $17,000 per year (as of 2023), or $34,000 together, to as many different individuals as you like gift-tax free. The exclusion is per recipient, not per giver, so annual gifts can really add up. For example, if you gave away $17,000 to 10 different people this year, this would remove $170,000 from your taxable estate.

How A Financial Advisor Can Help

A Simon Quick advisor can help you create a generational wealth transfer plan that accomplishes your objectives. To learn more, call us at (973) 525-1000 or send an email to info@simonquickadvisors.com.

About Anthony Santoro

Mr. Santoro joined Simon Quick in 2022 and currently serves as a Client Advisor. His expertise includes tax, executive compensation, estate planning, and wealth transfer. At Simon Quick, Anthony provides clients with holistic oversight and counseling at the intersection of law and finance. Prior to Simon Quick, Anthony worked as an attorney, where he concentrated his practice on trust and estate planning and administration, representing owners of closely held businesses and principals of private equity funds. Anthony began his financial services career with Ayco, a Goldman Sachs financial planning-focused firm. Most recently he served as an Attorney in a Trust and Estates Law Firm and as a Partner and Family Office Director with their affiliated RIA. Anthony graduated with a BS from SUNY Albany and his Juris Doctorate from Albany Law School. He is a member of the New York State Bar Association and Financial Planning Association of Northeastern New York. To learn more about Anthony, connect with him on LinkedIn.


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