The great wealth transfer is underway. According to Cerulli Associates, an estimated $84 trillion will change hands by 2045, with most going to Gen X and millennial heirs. “The real reality is that most families are not talking about money,” said Stacy Francis, president and CEO of Francis Financial, at the Your Money event last week.
In some cases, adult children may have unrealistic expectations about inherited wealth. Francis noted that it is important to manage these expectations. Some Americans do not want to pay an attorney to draft key documents like wills, trusts, or health-care proxies.
But a proper estate plan can “make or break the financial values that you want to impart to your children,” Francis emphasized. “Online tools are great, but they don’t take the place of a very smart advisor to help you do this planning,” she said.
Navigating the wealth transfer landscape
Updating beneficiary designations on all financial accounts is crucial. Francis said these designations outline where assets go upon death. The Tax Cuts and Jobs Act (TCJA), enacted by former President Trump, significantly increased the lifetime exemption for tax-free wealth transfers during life and at death.
Starting in 2025, the exemption for individuals and married couples filing jointly, currently at $27.98 million, could see significant changes unless Congress extends the TCJA provision. It’s an incredibly high exemption that we have now,” said Samantha Pahlow, wealth management chair of Emerge Wealth Strategies in Portland, Oregon. Clients frequently ask about the expiration.
However, Pahlow noted that predicting the future of the exemption is difficult given Congress’s and the White House’s uncertain control. According to the experts, professional guidance and timely updates to your estate plan are key to navigating this massive wealth transfer.
