By Robin L. Cook, CWS®, CTFA®
Are your children, grandchildren, nieces, and nephews ready to inherit your wealth? Have you set up your estate to protect and keep your assets within your family, and take advantage of the current high estate and gift tax exemption limits?
Over the next two decades, Americans are expected to pass down trillions of dollars in what some are calling “The Great Wealth Transfer,” but almost half of adults expecting an inheritance in the next decade say they don’t feel ready and confident about their ability to manage the money, according to a survey by New York Life.
• Just 42% of adults expecting an inheritance said they feel comfortable about their ability to manage their new wealth, according to a New York Life survey.
• On average, adults expecting an inheritance anticipate more than $700,000.
• Respondents expect higher prices, interest rates, and credit card debt could impact their inheritance.
There are some strategies that you can employ now to help prepare the next generation to inherit your wealth, provide asset protection and maybe even reduce estate taxes.
1. Have a conversation with your children/heirs to learn about any personal, financial, or medical concerns they may have about inheriting your wealth.
2. Meet with your estate planning attorney and make any estate document updates needed to keep assets within your family, protect against creditors, spendthrift, special needs, substance abuse, unstable marriages, and other concerns.
3. Conduct a family meeting along with your wealth advisor and your estate planning attorney to discuss how the estate plan is set up and why it was constructed that way. You don’t necessarily need to share the dollar amount of your estate. Take this
opportunity to share your wishes for your legacy and any philanthropic desires. If you are placing inheritance assets into a trust rather than giving an outright distribution, an explanation as to why you are putting these funds into this protective wrapper can help
alleviate future confusion and disappointments.
4. If your finances allow, consider making monetary gifts to your children now. This can be a learning experience and may provide you with a window into how they handle money. In 2023 you and your spouse can each give up to $17,000 to any person. You can make
gifts above this amount; however, the IRS will require you to file a 709-gift tax return to track amounts you have used of your lifetime gift exclusion.
5. If your children already have considerable assets, speak to your estate planning attorney to determine if a generation skipping trust could be of value.
6. Keep an eye on the sunset date January 1, 2026, of the current federal lifetime gift and estate tax exclusion amounts. In 2023 that amount is $12.92 million ($25.84 million per married couple). If unchanged, the estimated federal lifetime exclusion will drop to about
$6-$7 million per person or $12-$14 million per married couple. The current marginal tax rate for dollars exceeding this lifetime amount is 40%.
7. If your net worth exceeds the exemption limits mentioned above, speak to your estate planning attorney and wealth advisor about strategies you can utilize to move funds or assets out of your estate now. If you have assets that may increase dramatically in
value during your lifetime these strategies can add even more value.
8. If your spouse predeceases you, be sure to discuss with your estate planning attorney and tax preparer the advantages of the portability election to capture your deceased spouse’s unused lifetime gift and estate tax exclusion amount.
9. Consider making your charitable bequests by naming qualified nonprofits as beneficiaries of your traditional IRA rather than using after tax dollars. IRA withdrawals for a person are subject to ordinary income tax. If your estate exceeds the federal gift
and estate tax exclusion limits, IRA assets could also be subject to Federal estate tax (double taxation). If you or your children are residents outside of Florida, there may be state taxes as well.
10. Make sure your assets are titled properly. Proper estate documents and trusts are only part of the equation. Working with your wealth advisor to coordinate the re-titling of your assets, also known as funding your trusts, or other entities, is a critical part of the
process.
11. Keep communications open with your family and financial professionals. Circumstances and tax laws change, and your estate documents should change with them.
For many, an inheritance can be a blessing but for some it can be a curse. You know your family members better than anyone. With careful planning, you can help alleviate discord and prepare your beneficiaries for success.
Robin L. Cook, CWS®, CTFA®
Robin joined Suncoast Equity Management in 2022. She has a long-standing career in the financial services arena with over 30 years of well-rounded experience. Robin specializes in providing comprehensive wealth management services and developing deeply personal client relationships helping high net worth individuals, families, foundations and nonprofits preserve and grow their wealth. Prior to joining SEM Robin served for 8 years as Executive Vice President of Wealth Services at The Sanibel Captiva Trust Company, as a Certified Wealth Strategist at Regions Bank and as a Private Banker at Fifth Third Bank. In these roles Robin established herself as a top performer both in new business development, and client retention which resulted in being recognized multiple years as a “Chairman’s Club” award recipient.
Robin is a resident of Sanibel Island and enjoys being involved in the community. She is a member of Sanibel Captiva Business Women’s Association, Sanibel Captiva Rotary and volunteers for SanCap Cares Golisano Children’s Hospital Fundraising Committee and the Sanibel Captiva Conservation Foundation. Robin has served on boards for the Captiva Historical Society, Gulf Care Inc. retirement community, and The Cape Coral Community Foundation. Robin was recognized as the American Business Women’s Association “Sanibel Captiva American Business Woman of the Year” in 2013 and is a graduate of the “Leadership Cape Coral” program.
Robin has continuously sought out educational opportunities to better serve her clients. Robin completed the ABA’s Graduate School of Banking program the University of Florida in 1999, followed by earning the CERTIFIED WEALTH STRATEGIST™ (CWS®) certification in 2013, and the CERTIFIED TRUST FIDUCIARY ADVISOR™ (CTFA®) certification in 2022. Robin previously held a Florida Insurance license, the General Securities Representative (Series 7) license, and the Uniform Securities Agent (Series 63) license.
Please note that this column does not constitute an offer to sell or a solicitation of an offer to buy any security or investment vehicle. Accordingly, no representation or warranty, express or otherwise, is made and no reliance should be placed on the fairness, accuracy, completeness, or timeliness of the information contained herein.
