The Great Wealth Transfer: Timely guidance for givers & receivers

Maybe you’ve heard: The largest wealth transfer in U.S. history is now under way, with $124 trillion in private wealth projected to change hands by 2048, according to Cerulli Associates.

That’s a lot of cash, though it isn’t all cash. Over the past century, today’s elder generations—particularly Baby Boomers and the Silent Generation—have accumulated considerable wealth in many forms, from stocks and croplands to life insurance policies, business equity and beyond. The so-called Great Wealth Transfer will include it all.

Millennials and Generation X stand to inherit most of this wealth, while an estimated $18 trillion will pass to charities, per Cerulli.

What does it all mean for you and your family? The answer depends on whether you expect to pass on or inherit wealth of any kind or quantity in the near future.

We asked Thrivent clients and financial advisors for wealth transfer wisdom at both ends of the spectrum. Ultimately, wealth transfer isn’t just a one-time financial event; it’s an ongoing practice of stewardship meant to reflect a family’s values across generations.

“We figured it out—and so will our kids.” So goes a common sentiment heard by Kyle Olson, a Thrivent financial consultant with Next Generation Financial Advisors in Hiawatha, Kansas. This approach might sound stern, but Olson says some of his clients resist formalizing wealth transfer plans out of genuine concern for their children’s financial independence.

Perhaps these individuals had to rely on their own resources to establish themselves financially—without the safety net of a family trust or inheritance—and believe their kids should do likewise.

Good intentions aside, Olson notes that this view often stems from generational taboos around discussing money. Some people would simply rather keep quiet about their wealth, even if it means leaving their heirs in the dark.

However, “just because the next generation can figure it out doesn’t mean they should have to,” Olson says. He believes thoughtful planning empowers clients to leave efficient, meaningful legacies that help fortify their children’s financial health.

Does that sound too good to be true? Many Americans doubt they have enough wealth to fund their entire retirement, let alone a meaningful legacy. But this, too, is often more misconception than fact.

“We tend to look at our wealth one statement at a time,” says William Maar, Thrivent wealth advisor with Maar Financial Group in Valparaiso, Indiana. “Rarely do we put all the pieces together to see the whole picture.”

By considering the whole picture, Maar has helped numerous clients discover they have more wealth than they realized. “I have seen many of my clients tear up when we add up all the assets in their estate,” he adds.

Regardless of net worth, the most effective way to ensure your wealth goes where you want when you’re gone—and long before—is to create a plan.

Like many retirees, Garry and Susan Stoll can pinpoint the event that drove them to prioritize will and estate planning: Garry had a stroke.

Run-ins with mortality have a way of putting things in perspective. The Stolls, Thrivent clients from La Porte, Indiana, took Garry’s health crisis as a sign to extend their financial plan beyond their lifetimes.

First, they partnered with Maar and their attorney to draft and update several key estate planning documents, including an asset inventory and their wills. This provided a clearer picture of what they possessed, how they could cover retirement expenses and what they might one day leave to their two children.

“We’re pretty practical with our money,” says Garry. “Working with Bill made us realize our problem in retirement would be finally spending what we had worked to accumulate.”

Maar and Olson have both witnessed how a fear of the unknown can keep retirees from committing to long-term estate planning decisions. What if I face unplanned medical bills? What if I live longer than expected? What if the markets crash?

None of us can predict the future, of course. But Olson believes contingencies like these should drive us toward planning, not away from it.

“It’s important to distinguish realistic concerns from fear-based ones,” he says. “Using Thrivent’s planning tools, I try to show my clients the black-and-white numbers of their situations to help them feel confident in the decisions they make about wealth transfer.”

In addition to Maar’s guidance, the Stolls looked to the example of their parents. “My mom had her ducks in a row when she passed,” Susan reflects, noting the logistical ease of settling her mother’s estate. “We wanted to make things easy for our kids, too.”

By clarifying their intentions now, the Stolls hope to spare their children the potential headache, and heartache, of sorting through their parents’ estate on their own one day.
“One day” is the key phrase. Garry and Susan fully expect their kids to demonstrate fiscal responsibility and independence throughout adulthood. And while they’ve discussed their plans as a family, they never share exact numbers.

“The first rule is we don’t talk specifics about money,” Garry says. “That’s none of their business until we make it their business.” Garry has even teased his kids that “I’m taking everything with me when I go”—a classic dad joke—but they just laugh it off.

As part of estate planning, Maar often recommends meeting with families to begin conversations on values and purpose. The Stolls have introduced their children to Maar and the few advisors who oversee their property and investments. That way, the Stolls know their children will be more prepared to make knowledgeable financial decisions and whom to contact with questions during transition periods.

If discussing money with family can be awkward, broaching the topic of inheritance can feel even more uncomfortable. These conversations force us to face the elephant in the room: That one generation is always giving way to the next; that people die. A trusted financial advisor can serve as a mediator in these situations, helping facilitate emotional discussions and decisions from a neutral perspective.

“When a loved one passes, matters like inheritance can feel abstract,” says Olson. For this reason, he and his colleagues prefer to meet with surviving spouses and kids “as soon as administratively possible,” to field immediate questions and ease anxiety about next steps. They also encourage clients to observe a two-week respite before making significant financial moves after a death.

“In subsequent conversations,” Olson says, “we take time to walk through the personal values of the deceased as we have learned them over the years, in addition to the needs of beneficiaries, potential tax complications and overall priorities for the estate.”

All this helps beneficiaries ensure the inheritance remains, as he says, “a thoughtful blessing rather than a source of stress.”

Yet every inheritance comes with its responsibilities. In many cases, loved ones want to pass on values and traditions as much as financial wealth. Beneficiaries thus find themselves obliged to honor these wishes as well as managing their own affairs.

Maar encourages them to view the transition as an opportunity to “make sure your financial house is in order. ”We’ve all heard horror stories of prodigal heirs who squander huge sums of money on reckless living. The moral is obvious: No windfall, however handsome, can substitute for sound financial habits.

“I try to help beneficiaries be pointed about what they’re planning to do with the inheritance,” says Maar. “It’s common to turn to bills that need paying. But I like to go deeper and ask how they got those bills to begin with.”

Ideally, beneficiaries would have their financial houses in order long before the thought of inheritance has crossed their minds. Banking on a future bailout from Mom and Dad isn’t just risky—it also might deter you from taking ownership of your own future.

Still, an inheritance remains a gift with extraordinary potential for good, be it paying off a mortgage, starting a college savings fund for a grandchild or continuing the family business. Moved by generosity, many beneficiaries wish to honor their loved ones by spending a portion of the money in their memory. This could be as simple as taking a vacation to a meaningful destination, something Maar has encouraged and seen several clients do. Others establish a donor-advised fund to support charities that reflect family values.

When asked what advice Garry and Susan had for other Thrivent clients considering wealth transfer, their message was clear: Start early. “You don’t have to be old to start planning,” Susan says.

To that end, here are several tips to help you get started on the right foot:

Without an updated beneficiary, your assets might not go where you intend, regardless of what your will says. Hopefully, you are in the habit of periodically reviewing your beneficiaries with your financial advisor. But only you know the extent of your personal accounts. Don’t forget to check beneficiary designations on bank accounts or older life insurance policies, for example.

Without a plan, these assets will automatically be counted in your estate and sent through probate after you die. From small businesses to condos and cars, non-cash assets can represent a large portion of your total wealth. For example, Olson has helped cattle farmers create a transition plan for “the $100,000 asset mooing in the backyard.”

Account numbers, passwords, instructions—take time to document key estate details and store them in a secure location that your executor can access when necessary. “Everybody loves an Easter egg hunt,” says Olson, “but no one loves hunting down an old life insurance policy.” Work with your financial advisor to identify what information will be most useful to your heirs, and document or update it soon.

A significant portion of assets changing hands in the Great Wealth Transfer are tax-advantaged qualified accounts, including 401(k)s, IRAs and other common retirement plans. Without a strategy in place, passing assets like these to your beneficiaries can come with a hefty tax bill. Even if your estate value doesn’t surpass the current federal tax exemption amount of $15 million (or $30 million for married couples), you should still discuss the subject with your financial advisor and tax professional.

We’re living through a momentous period, this Great Wealth Transfer. Let it serve as a reminder to tidy up your financial house: Create that will, update those beneficiaries, have that conversation. After all, the financial choices you make today can echo for generations.

Cameron Brooks is a marketing strategist for Thrivent.