As you enter retirement, one of your biggest priorities is likely ensuring your assets are properly distributed according to your wishes. But have you considered how your estate plan could also benefit your millennial children and grandchildren down the road?
For the millennial generation, achieving financial stability is an uphill battle. Many entered the workforce during the 2008 financial crisis and have since navigated economic challenges like the COVID-19 pandemic. Now, this "sandwich generation" juggles caring for aging parents, like yourself, and their own children simultaneously.
The Struggles Facing Your Millennial Children
According to a study by Trust & Will, millennials face "significant obstacles to achieving financial stability compared with previous generations at their age." A major factor? The soaring costs of childcare and eldercare in the United States - expenses your millennial children are likely grappling with as they support a multi-generational household.
As Trust & Will notes, "the costs of both childcare and eldercare are increasing to unsustainable rates." For the sandwich generation, these dueling financial burdens can make it exceedingly difficult to get ahead. They may be depleting their income and struggling to set aside savings for their own retirement and their children's futures. Having to pay for your care as you age while also funding childcare is a perfect storm that could seriously derail your millennial kids' finances during their critical wealth-building years.
While you may be financially stable in retirement, seeing your adult children stressed about money can be worrisome as a parent. This is where having a comprehensive estate plan in place could make a significant difference not just for your own interests, but for the financial well-being of your millennial children and grandchildren in the long run.
Understanding Your Estate Planning Options
What is an Estate Plan?
An estate plan is a set of legal documents that spell out how you want your assets and end-of-life decisions handled. Common components include:
- A will stating how you'd like your money, property, and possessions distributed after you pass away
- Durable powers of attorney appointing trusted people to make financial and healthcare decisions on your behalf if you become incapacitated
- Trusts that allow you to transfer assets in and out during your lifetime while avoiding probate later on
- Beneficiary designations on accounts like life insurance policies or retirement plans
While drafting these documents can seem tedious, working with an estate attorney ensures your wishes are properly documented and legally binding.
Why Estate Planning May Be Beneficial for Your Estate
As you near or enter retirement, having an up-to-date estate plan in place is important for a few key reasons:
1. It allows you to control how your assets and legacy are distributed after you're gone, rather than leaving it up to the courts through probate.
2. It presents opportunities to use tools like trusts to potentially minimize estate taxes that could otherwise significantly reduce what is passed down.
3. You can ensure a smooth inheritance process for your heirs by proactively addressing complex situations like blended families or taxable gifts.
Ultimately, proper estate planning can provide you peace of mind knowing your final affairs are in order according to your exact wishes. But the benefits don't have to stop there - it could also help ease financial burdens for your millennial children down the road.
How Estate Planning Could Help Your Millennial Kids
Potentially Reducing Their Financial Burdens
For your millennial children acting as part of the “sandwich generation,” inheriting money or property from your estate could provide some much-needed financial breathing room. With a solid plan for asset distribution in place, the wealth transfer process may be able to happen more quickly and efficiently. This could ease cash flow strains during a period when they're depleting funds on childcare and eldercare simultaneously.
Even if you don't have an extensive estate to pass down, having affairs properly documented could simplify the process of transferring smaller assets and accounts. This may help prevent headaches, legal complexities, and associated costs that could further drain your children's bank accounts during an already stressful time of grief.
Helping Avoid Drawn-Out Probate
If you pass away without an updated will and trust, your entire estate would likely have to go through the lengthy probate process. This legal procedure tends to be complex, public, and expensive - eating up more of the assets your loved ones would otherwise inherit.
However, with a properly structured estate plan that includes trusts and up-to-date beneficiary designations, your assets may be able to seamlessly transfer to your heirs without probate court involvement. This could allow your millennial children to access their inheritance faster and with less hassle.
Avoiding probate may also reduce opportunities for disputes among your children or other beneficiaries. Your legally documented wishes make the distribution process clearer, which could prevent family conflicts that drain emotional energy and money on legal fees for your millennial kids.
Protecting Your Family if the Unexpected Happens
Ensuring Asset Protection and Distribution Alignment
Beyond just deciding the "who" of asset distribution, an estate plan allows you to make legal provisions for "what if" scenarios involving your health. You can appoint trusted people to manage your finances and make healthcare decisions through a durable power of attorney if you become incapacitated later in life. This way, there are mechanisms in place to ensure your assets are properly protected and allocated according to your wishes - even if you can't directly make those calls yourself.
You can also establish ground rules for incentive trusts that distribute assets only if your heirs meet certain conditions, such as attending college or avoiding high-risk behaviors. These trusts could help protect your hard-earned wealth from being squandered while instilling values you want to impart to your millennial children and grandchildren.
Strategic Wealth Transfer & Tax Advantages
Possibilities for Minimizing Estate Taxes
Depending on the size of your estate and your millennial children's net worth, there may be opportunities to implement trusts or gifting strategies that reduce or delay estate taxes owed. Common tactics include:
- AB Trusts that allow married couples to maximize their combined federal estate tax exemption
- Gifting annual exclusions up to the annual federal limit to children/grandchildren tax-free
- Setting up Charitable Remainder Trusts to potentially minimize capital gains taxes while benefiting your chosen causes
An estate attorney and the Wealthquest team can analyze your individual financial situation and walk you through tax-advantaged options to potentially reduce the burden passed down to your heirs.
Charitable Giving Strategies
If philanthropic interests and values are important to impart to your millennial children and grandchildren, your estate plan allows you to build those priorities. For example, you could designate funds to be donated to specific charitable causes or organizations through donor-advised funds, foundations, or charitable trusts.
Certain giving vehicles like charitable remainder trusts enable you to potentially receive income for life while minimizing capital gains taxes. The remainder could then benefit your selected charity after you're gone.
In addition, you can establish incentive trusts that only distribute money to your heirs if they also uphold your philanthropic values by donating a portion to eligible charities. This helps your charitable legacy live on through future generations.
Taking the First Step
While the estate planning process requires careful documentation, the benefits of having a comprehensive plan in place could extend far beyond your own interests. For millennials grappling with the financial strains of supporting a multi-generational household, their parent’s estate plan may help provide relief and security down the road.
Wealthquest can work with your legal representation to demystify the process, explain options, and tailor a plan designed to be aligned with your unique goals for passing on a lasting legacy. You'll gain peace of mind knowing you've checked this critical item off your to-do list while potentially lightening future financial burdens for your millennial kids when you're gone.
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