Preparing for the Coming Wave of Wealth Transfers


Rising affluence and an aging population are expected to trigger a vast transfer of wealth over the next 30 years. According to Boston College’s Social Welfare Research Institute, approximately $40 trillion or more will pass from one generation to the next by 2052. With so much wealth changing hands, the need for estate planning is bound to increase among those who pass on assets. At the same time, investment planning will be paramount for those who inherit assets.

While each situation is unique, here are a few planning thoughts for givers and receivers.

Making Wishes Happen

A variety of legal documents and tools can help ensure that your assets are distributed according to your wishes. These may include a will, powers of attorney, and one or more types of trusts, such as a living trust, which may help you control assets while you are alive and potentially provide tax benefits.

Assets held outside your will — including life insurance contracts, IRAs and employer-sponsored retirement accounts — will pass directly to beneficiaries you’ve named to receive them. Consequently, it’s necessary to keep such beneficiary designations up-to-date and accurate.

In some cases you may want to plan for special contingencies — for example, arranging for a custodian to manage an investment account until a child reaches legal age.

In addition to ensuring that your assets pass to those you intend, reducing taxes is a major purpose of estate planning. New federal estate tax laws were established in 2001, bringing about a gradual reduction of estate taxes through 2010. Under current rules, taxpayers can exclude the first $2 million of an estate’s assets from federal estate taxes in 2006, and $3.5 million in 2009. The law also decreases estate tax rates. Currently, the top rate is 48%. This rate gradually decreases to 45 percent in 2007, and in 2010, the estate tax will be repealed. In 2011, however, unless Congress intervenes, the estate tax will revert to the pre-2001 tax structure, with a $1 million exemption and a maximum rate of 55%.

While current tax law creates opportunities, it also requires planning vigilance. For instance, you may want to review your will and any trusts and rebalance assets to ensure that the division of wealth between you and your spouse and other beneficiaries remains as intended.

Managing a Windfall

Receiving an inheritance opens up its own set of investment, tax and estate planning issues. Think carefully about how to make the best use of inherited money. Should you use it to reduce debt? If you’re investing it, review your priorities: Are you on track to meet your retirement income needs? If you have children, are you setting aside enough for their education needs?

While a windfall can help you make progress toward achieving your financial goals, it must be managed effectively to retain — or, better still, enhance — its value. For instance, rolling a retirement plan distribution into another qualified tax-deferred retirement plan may avoid potentially costly taxes.

Whenever you are the recipient of a windfall, you’ll want to talk with your financial advisor and your tax advisor about your options for investing this newfound wealth. After all, your inheritance today could be part of the wealth you transfer to the next generation.

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Joshua D. Mosshart is a registered representative with and offering securities through Linsco/Private Ledger
(LPL) Member NASD/SIPC. California Insurance # 0C90229. Linsco/Private Ledger, 2625 Townsgate Road, Suite 330, Westlake Village, California 91361; phone: (805) 267-1162; website:

Money Talks is a regular department in Agency Sales magazine. This column features articles from a variety of financial professionals and is intended to showcase their individual opinions only. The contents of this column should not be construed as investment advice; the opinions expressed herein are not the opinions of MANA, its management, or its directors.