“Maximizing Wealth Transfer: Strategies for Baby Boomers to Support Their Heirs and Charities During Their Lifetime”
Baby boomers are preparing to transfer an estimated $50 trillion in wealth over the next 20 years to their Generation X and millennial children. Many of these boomers are not interested in waiting until after they die to provide financial support to their heirs and charities, following the example set by billionaires like Warren Buffett and Bill Gates who have pledged to give away a significant portion of their fortunes during their lifetimes.
One of the major concerns for boomers looking to provide financial assistance to their loved ones is the cost of long-term care. With more than half of 65-year-old Americans expected to require some form of long-term care service, the expenses can add up quickly. Without long-term care insurance, seniors often have to rely on their savings and government assistance, making it a challenging decision to balance support for family members while ensuring retirement security.
While the default option for many retirees is to wait until they pass away to transfer wealth, there are downsides to this approach, such as missing out on seeing how the support impacts their heirs and charitable organizations. Financial planners recommend including “giving while living” in estate plans to help children and grandchildren achieve important goals like paying for college or buying a home. This allows individuals to assess how their support is being used and make adjustments as needed.
To successfully give while living, individuals need to create a financial plan that considers their income, expenses, and retirement goals. Professional guidance is advised to ensure the right balance between helping loved ones and maintaining financial security. Strategies such as annuitizing a portion of retirement savings or using charitable gift annuities can provide a source of guaranteed income while fulfilling charitable goals.
Various tax-efficient strategies can be used to give to family members and charities, such as making annual gifts within the IRS limits, contributing to 529 college savings plans, or leveraging donor-advised funds. Helping heirs with gifts of appreciated securities can reduce estate taxes and may result in tax benefits for recipients if they are in lower tax brackets. Additionally, philanthropic goals can be met through strategies like qualified charitable distributions, donor-advised funds, and charitable gift annuities, providing tax benefits and opportunities to support charities during one’s lifetime.
Overall, the key takeaway is that boomers have the opportunity to strategically plan their wealth transfers to support their loved ones and charitable organizations while maintaining their financial security and ensuring they can see the impact of their contributions. With careful planning and the use of tax-efficient strategies, boomers can create a legacy that benefits both their family and society.