The next few decades will see a vast amount of wealth transferred from Baby Boomers to their children. The question is, will those children be ready to manage new wealth?
Almost $30 trillion in assets has already started to pass from one generation to the next, according to Delaware Online in “You've just inherited a million dollars. Now what?” Ten percent of this enormous transfer will take place within the next decade, and the passing of Boomers, who are considered the wealthiest generation ever, will create a whole new class of millionaires.
Many are saying that the situation is tougher on the person receiving the money, than the one giving it away.
It is hard to tell a younger person to think long-term today. However, the best thing a “suddenly rich” person can do is to hire a financial advisor, trust and estates attorney and a CPA.
It’s best for children look around, until they find a financial advisor who matches their needs. Studies show that about 66% of children fire their parents' financial advisor when they inherit their wealth. Millennials and Gen Xers may feel more comfortable with a person closer to their own age with contemporary ideas.
Get comfortable with that person and their compensation. Make sure that you select a financial advisor who has your best interests at heart.
Children who inherit a large amount of money should pause and consider their short- and long-term goals. When you understand your goals, it’s easier to find an advisor who can execute that vision.
A financial advisor will monitor the inheritors’ financial goals and keep them on course. Sometimes, those who receive a sudden windfall don’t truly comprehend how much money they have. As a result, they burn through it like it was going out of style.
Inheritors shouldn’t run out and make major lifestyle changes right away. Flaunting new found wealth, like buying a Porsche or adding a swimming pool to your house, could make you a target for scammers.
Boomers and their children should have meaningful discussions about what the inheritances will mean to the heirs and how to handle a sudden windfall. Perhaps the family wishes to establish a legacy, or maybe the kids want to start a business. Another consideration: talk with an estate planning attorney about the use of trusts to protect inherited assets from creditors (car accident, slip and fall, business failure), divorcing spouses, and estate tax at heir's death. An estate planning attorney can guide parents and heirs.
The attorneys at Legacy Counsellors, P.C. will work with you to create an estate plan, align your assets to this new plan, maintain your plan throughout your life, and settle your assets after your death. We are here to provide guidance and advice to your heirs about their inheritance and how to perpetuate this gift. If you are in need of an estate plan, please contact us today.
Reference: Delaware Online (June 23, 2017) “You've just inherited a million dollars. Now what?”