High-net-worth individuals from different generations have very different priorities when it comes to how they plan to distribute their wealth. A new Schwab survey of over 1,000 wealthy Americans — defined as those with more than $1 million in investable assets — found that millennials and Gen Xers are more than twice as likely to share their wealth with the next generation during their lives (53% and 44%, respectively) compared to boomers (21%), who are more likely to say they want to enjoy their money themselves during their lifetime (45%).
Still, high-net-worth boomers will be passing on millions of dollars — an average of $3.1 million each. Here’s how they plan to distribute their wealth.
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Investments
Wealthy boomers expect to pass on $1.6 million on average via investments.
“When thinking about transferring investments, the first step is to identify what type of account that the investments are held in — i.e., taxable or a retirement plan,” said Susan Hirshman, director of wealth management for Schwab Wealth Advisor.
“If in a taxable account, look at the title and the ownership of the account,” she continued. “If in a retirement account, look to the beneficiary designations. For both, ensure that they are aligned with your wants, wishes and overall estate plan, as the designations and ownership titling are the drivers of the heir recipient, not your will or trust.”
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Real Estate
Millionaire boomers plan to pass on $750,000 worth of real estate on average.
“If you plan on passing a personal residence and you have more than one heir, the key to a successful transfer is introspection,” Hirshman said. “It’s imperative to consider the dynamics between the heirs. You may want to keep the home in the family, but would they?”
Hirshman recommends asking yourself the following questions if you plan to pass on real estate to multiple recipients:
- Would they be good partners in terms of developing and agreeing on how to share usage and expenses?
- Would either of them have liquidity needs and want to sell prior to another?
- Do any have their own vacation homes or have vacation styles that don’t align with inheriting a vacation home?
- Would any of the heirs have financial difficulty with ongoing maintenance costs?
- If there is a mortgage on the property, would all heirs be able to service it?
“Furthermore, if you do have a revocable trust, is the property titled properly — i.e., if you set up trust after home purchase, did you change the title to reflect the trust — to avoid probate?”
Cash
The average wealthy boomer plans to pass on $550,000 in cash.
“When looking at your estate, you want to ensure that if applicable, your estate has the liquidity it needs to pay for final costs and debts,” Hirshman said. “Some people choose to put a POD, payable on death, designation on a bank account, but again, you should ensure that the designation is aligned with your overall estate plan. A better choice may be that the accounts are titled in the name of the trust if you have a revocable trust in place.”
Death Benefit Proceeds
Finally, wealthy boomers plan to pass on $170,000 in death benefit proceeds.
“The key is to make sure that the beneficiary designations are up to date,” Hirshman said. “Have there been any changes to family structure since you took out the policy? Often we see issues when divorces happen and people forget to change the beneficiary designation of the policy to the appropriate heirs.”
Who Will Be Receiving This Wealth?
Millionaire boomers plan to pass on the largest portion of their wealth to their children (30%), followed by their spouse/partner (28%), charities (13%) and grandchildren (10%).
Hirshman recommends taking the following steps to ensure any wealth you want to pass on goes to the correct beneficiaries:
- Review your beneficiary designations and account titling on a consistent basis to ensure they align with your goals.
- If you set up a revocable trust, ensure that the investment accounts, real estate, etc., is titled appropriately and will thus be allocated according to the provisions of the trust.
- If you have a revocable trust, also have a pour-over will to ensure that any accounts not properly titled will pass according to your wishes.
- Review your estate plan flow at least every three to five years to ensure that the right assets go to the right person or entity in the right amount at the right time.
- Select an executor or successor trustee that has the time, temperament and ability to mange your estate effectively.
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This article originally appeared on GOBankingRates.com: Wealthy Boomers Will Be Passing On an Average of $3.1M: Where That Money Will Be Going
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