The significant transfer of wealth is currently in progress. Cerulli Associates estimates that around $84 trillion will exchange hands by the year 2045, with the majority allocated to Generation X and millennial beneficiaries. “The real situation is that most families are not discussing financial matters,” commented Stacy Francis, the president and CEO of Francis Financial, during the Your Money event held last week.
In some instances, adult offspring might hold unrealistic assumptions regarding their expected inheritance. Francis pointed out the necessity of aligning these expectations. A segment of Americans is hesitant to incur costs for legal services to draft essential documents, such as wills, trusts, or health-care proxies.
Nevertheless, a well-structured estate plan can “significantly impact the financial lessons that you wish to pass on to your children,” Francis highlighted. “While online tools are useful, they cannot replace the expertise of a knowledgeable advisor to guide you through this planning,” she added.
Understanding the landscape of wealth transfer
It’s vital to revise beneficiary designations across all financial accounts. According to Francis, these designations specify the distribution of assets upon an individual’s passing. The Tax Cuts and Jobs Act (TCJA), introduced by former President Trump, has greatly enhanced the lifetime exemption for tax-free wealth transfers both during life and posthumously.
Beginning in 2025, the current exemption for individuals and married couples filing jointly, set at $27.98 million, may undergo notable alterations unless Congress extends the provisions of the TCJA. “This is an exceedingly high exemption we currently enjoy,” remarked Samantha Pahlow, chair of wealth management at Emerge Wealth Strategies in Portland, Oregon. Clients often inquire about the potential expiration of this exemption.
However, Pahlow emphasized that forecasting the future of the exemption is challenging due to the unpredictable dynamics within Congress and the White House. Experts advise that professional advice and timely revisions to your estate plan are critical for successfully navigating this extensive wealth transition.
