Transferring Wealth: Your Guide to Success

There are certain subjects that are off limits in polite conversation. Transferring wealth is one of them, but secrecy about wealth within families can do more harm than good. 

Leaving a lasting legacy and ensuring the next generation can handle family wealth starts with a conversation. We recognize these discussions can be difficult depending on your family dynamic, so we have put together a guide to help you in your journey of transferring wealth to the next generation.

Fair Doesn’t Always Mean Equal

As parents and grandparents, we try to treat our loved ones fairly, but fair does not always mean equal in transferring wealth. When there are multiple children and grandchildren involved, communicating decisions in advance may help to prevent conflict and foster understanding among families who may receive different assets at different times. For example, there may be tax advantages to leaving an IRA to one child in a lower tax bracket who will pay less in income tax than to other children who earn a higher income and will lose more of the asset to taxes. Similarly, it may make sense logistically to leave a house or other property to a child who lives nearby and leave other assets (like a brokerage account) to a child out of state. These planning strategies make sense financially, but without clear communication, they can cause friction once you’re gone. A clear discussion of your intentions and thoughtful planning can ease any tensions. 

Tip: Hold a family meeting with a trusted advisor (your financial advisor, CPA or attorney) who can provide unbiased guidance and explain the technical features of the planning strategies to your children and grandchildren. You can focus on your relationships with your family and sharing your vision, while your advisor can be a buffer if needed. 

Wealth Transfer Starts Now 

We often think of transferring wealth as a one-time event after we are gone, but a successful wealth transfer strategy should begin now. As advisors, we help navigate this journey with our clients and their families and have learned countless lessons along the way. Our most successful stories come from families who began their gifting strategies early, allowing them to teach and guide their children and grandchildren as they experience building their own wealth. Giving wealth to your family in small amounts over time allows them to manage reasonable amounts before inheriting the family coffers. It also allows the giving generation to witness how their families handle the wealth and make adjustments to their estate plan as needed. 

Tip: Work with your advisor to understand how much you could give annually to your family and still meet your own long-term financial goals. This kind of giving could be done with cash, assets, or paying for certain expenses for your children like education, childcare or vacations. Watch how your family receives and uses the gifts so you will know how to update your estate plan with more protective strategies if necessary. 

Transferring wealth to the next generation is a journey, not a one-time event.

Transferring wealth to the next generation is a journey, not a one-time event. Beginning early and communicating your intentions is the greatest gift you can give your family. At GW Financial, Inc., our mission is to help you achieve financial autonomy, together, so you can give away $1 million during your lifetime. How have you included giving in your financial plan? Let’s figure it out together! Click here to schedule a Getting Acquainted Call today.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by GW Financial, Inc. to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.  Copyright 2023 GW Financial, Inc.