Tax Planning

$68 trillion is about to change hands in the US 

The biggest wealth transfer in history is about to happen – here's how to be part of it
The biggest wealth transfer in history is about to happen – here's how to be part of it
Key Points
  • Baby boomers are the wealthiest generation in American history — and they're about to pass down those riches over the next few decades. It's the so-called Great Wealth Transfer.
  • Yet that exchange might not be as large as you had hoped if you don't take the right estate-planning steps.

The biggest wealth transfer in history is about to happen — and it's now expected to be more than double what many thought it was. It's estimated that 45 million U.S. households will transfer $68 trillion in wealth over the next 25 years, according to Asher Cheses, a research analyst and lead author of a new report from financial services research firm Cerulli Associates.

Baby boomers, who hold the lion's share of that amount, are the wealthiest generation in American history — thanks in no small part to a 10-year bull market. That generation will pass down those assets over the next few decades. Here's what you should know to make sure that transfer is as smooth as possible.

Ensure there's still some wealth to pass down

Make sure the inheritance you're poised to bequeath remains intact. Health-care expenses can add up fast. The cost of long-term care can wipe out an entire potential estate in just a few years. While the premiums can be hefty, some financial advisors say long-term care insurance is worth it.

Death & taxes

Most estates are not actually subject to federal estate tax now because the exemption is pretty high. But check the rules in your state. Some have much lower estate-tax thresholds.

Set up a trust

If you want to put some conditions on how your bequest is spent, consider a trust. Trusts can dictate exactly when assets pass to beneficiaries, or how it should be spent. For example, you can stipulate expenses be tied to education, or health care. Another plus: Trusts can minimize estate taxes and keep your estate out of probate court.

Consider a living trust

Keep in mind, the probate court process can be time-consuming and expensive, which ultimately just chips away at your estate. Another way to avoid it is to supplement the will with something called a “living trust.” It holds the majority of your assets while you’re still alive (so you can maintain control) and then transfers it to your beneficiaries after you die.

Avoiding probate also keeps your wishes private. Probate is public, which means everyone knows your business.

So take care with that legacy planning now, and your heirs will be well in the black later on.