What is Great Wealth Transfer?

• Introduction
• Wealth and Baby Boomers
• How Much Wealth Will Millennials Inherit?
• Building Generational Wealth for Wealth Transfer
• How do You Transfer Wealth to the Next Generation?
• What is a Wealth Transfer Coach?

Introduction

Statistically the median life expectancy in the United States is approximately 78 years old. Most of the great wealth in the United States are owned by a generation called Baby Boomer and this Baby Boomer generation is generally defined as persons born between 1946 and 1964. In 2020 the oldest members of this generation (owners of great wealth) are approximately 74 years old and its youngest 56 years old. The great wealth transfer begins as Boomers enter old age, retirement and unfortunately even die. They will be compared to rely more on their children at this stage and consequently over the next 20 and 30 years, most of the wealth in the United States will begin to shift. It will move from the accounts of baby boomers to Millennials and even Generation X.

Wealth and Baby Boomers

The first thing to understand about the great wealth transfer is just how real it is. In the United States, majority of the wealth are owned by Baby Boomers because as of today the Baby Boomers hold about 58% of all the wealth and assets in the United States economy. This generation; the Baby Boomer have done well for themselves. Some sources estimate that the Baby Boomers hold roughly $15 trillion in assets while other sources estimate the assets to be close to $59 trillion or even $68 trillion.

History of Baby Boomers Wealth

According to history the Baby Boomers as young adults entered into arguably the best economy the United States has ever seen. The Baby Boomers that attended college graduated and started professional careers with little debt because their parents paid the taxes necessary to keep university tuition low. Housing was plentiful, as good number of them invested in real estate. Strong labor protections ensured that even high school graduates could buy homes on an hourly worker’s salary. Those real estate appreciated in value over time. Even as the market-based retirement packages that many companies offered.

It is on record that the Baby Boomer generation has lived better and more prosperous lives than its children. By contrast their children, the Millennial generation, own barely 3% of wealth in the United States. In 1990 the Baby Boomers who were the same age as Millennials are now, had accumulated about 21% of the nation’s wealth. The difference is that the Baby Boomers ever since have kept right on accumulating, leaving precious little for anyone else.

How Much Wealth Will Millennials Inherit?

A study shows that by 2030 Millennials are anticipated to inherit over $68 trillion assets from their Baby Boomer parents and will hold five times as much wealth as they presently have today. In the United State, this will represent one of the greatest wealth transfers in the modern times ever seen.

Challenges Encountered by Millennials?

Millennials generation and others have had to wrestle with challenges their parents and grandparents never encountered. Unlike Millenials, Baby Boomers were beneficiaries of a great economy, which offered plenty of well-paying and safe jobs, robust stock market and substantial gains in real estate. While the Millenials generation are associated with burdensome college debt, costly real estate, the high cost of insurance and the increasing challenge of securing well-paying jobs. These and other issues have made Millennials lives more difficult than the Baby Boomer generation. But with the great wealth transfer their fortunes will dramatically change for the better. They now stand the chance to become one of the richest generation ever.

How many Millennial Millionaires in United States?

In the United State, about 2% of the total millionaire population are Millennials millionaires. According to WealthEngine data “there are approximately 618,000 Millennials millionaires”. Majority of these Millennial millionaires are between the ages of 34 and 37, and have a range of net worth from $1 million to $2.49 million. Due to wealth transfer, there will be a steady rise of Millennials getting very rich soon. This wealth transfer could contribute to increasing wealth inequality because the Baby Boomer generation (who are considered wealthiest in history) is larger than the Millennial generation. The wealth transfer will be highly concentrated, since many of them stand to inherit more wealth from their Baby Boomer parents.

The recipients of the assets will have to worry about how to manage the wealth, which is not so easy. Coming into a lot of wealth is nice, but managing it is hard, complicated and risky.

Building Generational Wealth for Wealth Transfer

Wealth transfer is the passing down of generational wealth to one’s offsprings or inheritors. There are various ways of building generational wealth that you can pass down to the next generation. The following are some of the ways you can build generational wealth.

Develop a Plan and Strategy

With great success comes adequate planning, plans and execution. Very importantly you must have a clear picture and plan of what you want to achieve in life. And to achieve this goal, it becomes necessary that you carefully plan your life and finance. Success in life and at anything requires commitment, discipline and sacrifice. To build wealth successfully you have to earn, save, invest and reinvest. This requires you become very financially literate and exposed. Create a budget for your finance, plan your income and expenses to meet your investment targets. You have to be intentional about this. The businesses you intend to invest in should also be clearly stated and take time to research about the businesses before venturing into any. Never start a business you know nothing about.

Be Wise in Your Spending

Spend intentionally but not out of impulse. Keep track of your expenses, get a notepad and record them. It is not enough to amass wealth but you must also learn to spend wisely. Set your priorities right and spend on the needful. It is important to spend money on things that are actually needed and not on mere wants. Plan your finances well and ensure that you are actually investing enough money on yourself and businesses. This implies that you’re not a spend freak and as a must avoid money traps. Your journey to generational wealth is highly dependent on how well and effective you spend money.

Stay Debt Free

For you to save or invest effectively, you must stay debt free. Building generational wealth means that you are planning to pass across assets and not liabilities. Else, it is no longer generational wealth you’re building but generational liability. Your financial plan must take care of how you intend to stay debt free. The are different methods via which you can pay off your debts. Snowball is one such method where you get to pay the debt with the smallest balance or you can also make use of the Avalanche method. With avalanche method, you can pay off your debt that has the highest interest.

Earn Passive Income

To build wealth, the must be a source of income. Wealth transfer is possible when generational wealth built from this income (s) are inherited by the next generation. Regular earnings from a source other than an employer are passive income. Passive income can come from a business in which one does not actively participate, such as being paid book royalties or commissions. It is believed that investment is the best way to generate passive income. You can invest your money in companies that offer high return rates. Always seek professional advice before you go into such investment. One good aspect of this kind of investment; You are not involved in the running of the business but your money is involved and you get returns on investment. To be financially free you must have multiple sources of income.

Invest in Real Estate

To build generational wealth, investing in real estate is indispensable. Real estate investment is one of the most durable investments you can invest on. The increasing United States population implies increase demand for real estate properties and services. The secret remains that if you are able to settle your mortgage, you can amass wealth from real estate. Although, you have to be aware that investing in real estate requires expertise guidance. Seek professional advice before embarking on one.

Invest in Stocks

Investing in stocks can yield high returns over time and other stock benefits.
There are several platforms online that can help guide you through the process of investing in stocks. When you invest in the stock market on a yearly basis, depending on the amount there is every chance that you will get returns running into millions of dollars, when you deliberately leave it for a longer period of time. This investment is a form of wealth that can be passed to the next generation.

Start a Business

No matter how long you last in a job, your children will not inherit it. Think outside your job. A business (s) is a form of wealth that you can transfer to the next generation. Start small and early, and over time with commitment it will grow. This is how most big businesses we know of today started. It is important that you venture into a business that you have some knowledge of and passionate about because most business takes time and patience to build. In the world today, there are a lot of people that generate wealth even while sleeping simply because they have a good automated system that makes it possible for their businesses to run efficiently.

Be a Risk Taker

Take risk but calculated one. If you wait for all condition to be right, perfect and conducive, you will never invest. Wealth creation demands guts that only risk takers can handle. This is because most great opportunities don’t appear so at the beginning. It therefore becomes important that you are strongly determined to take the calculated risks required. And of course, at some point you could be faced with setbacks in your quest to build generational wealth. However, be determined and remain resilient to achieve your goals. Taking risks is an essential quality of successful people.

How do You Transfer Wealth to the Next Generation?

One of the big part of the American Dream is to leave an inheritance. It doesn’t matter if it’s big or small inheritance to your children and grandchildren. But what matters is that wealth transfer has taken place.

This means you’ve done your part. You’ve worked and have sacrificed to accumulate wealth to pass along to your family. Now the question to be answered is: are they ready for it? To successfully transfer wealth to the next generation involves more than a smartly designed estate plan.

Statistics has suggested that 70% of heirs will lose their inheritance within a few years, often destroying the family harmony in the process. The good news is that there is much you can do right now to avoid these pitfalls and still enjoy the original good intentions of your inheritance through planning for the conservation, growth, and the transfer wealth to your loved ones. Let’s consider these four tips to help you ensure that your children appreciate and appropriately utilize the fruits of your labor:

Educate your Children

This means to formally teach your children about the responsibilities associated with an inheritance. And to instill a commitment to respect and preserve all aspects of your own family’s legacy. You should start this process from early childhood and become more particular as they mature. However, it’s not too late. Let your loved ones understand your reasons to want to provide this gift and see your vision of what it is might for them.

Don’t Underestimate the Value of Asset Protection

Nasty “stuff” do happen…even to the best of families. Adult children are always confronted with spendthrift lifestyles, creditors, problematic spouse, and the problems of substance abuse. What’s the solution? Make sure you leave a portion of your estate in a flexible, long-term trust. This will give your family the opportunity to enjoy the benefits of their inheritance. While protecting them from the aforementioned dangers.

Protect Young Heirs from Themselves

The major mistake made by most heirs is to spend heavily and quickly. Young adults need time to mature emotionally, establish their careers, to develop sound financial habits. As well as to understand the value of living below their means. Once again, a long term trust with flexible distribution standards will provide opportunity for your heirs to mature first before they have unrestricted access to their full inheritance.

Teach Your Heirs about the Value of Trusted Advisors

Often heirs try to manage their own investments. They take more risk by doing this, since they didn’t
even earn the money. This often lead them to poor investment choices, methods that will expose them to undue volatility, or even unscrupulous advisors. As the person to conduct the wealth transfer make sure they have a good relationship with your family’s advisors. Make sure they don’t meet your advisors for the first time after you pass away.

Remember this, your heirs are the stewards of your family’s legacy. So, prepare them now, and you will be more likely to enrich their lives and equally those of the next generation.

What is a Wealth Transfer Coach?

A wealth transfer coach is one that helps individuals and families in the following areas (to name a few):

Family Education

A wealth transfer coach facilitate family meetings and retreats, offering activities that will focus on family legacy, values, communication. As well as family systems, family business concepts (that’s distributions, ownership, stewardship), and NextGen (meaning next generation) education and leadership.

Family Business Governance

They will help your family create decision making processes, structures and agreements that will provide clarity for your family members, owners (stakeholders) and the business entity. Providing this guidance on decision making forums , family councils or boards, which will provide platforms for voices to be heard. Information that need to be shared and problems to be addressed using a formalized process. All these are done by by the wealth transfer coach. As humans we all have a relationship with money, and through this money messages that we have learned at an early age. This relationship will guide the majority of our behaviors throughout our lives.

Succession Planning

Helping your family to create a plan for transitioning key roles in a family business from one person to another.

Family Communication

The wealth transfer coach create safe spaces for difficult conversations to occur. These kinds of conversations will cover the spectrum from cross generational expectations about your daily life to selling a business and to determine how decisions will be made after the sale. The topics of discussion here are just endless. While some families know that they need to talk about these issues. They don’t know how to do it without creating upset or conflict. So they tend to avoid them, which will only make matters worse.

Having a wealth transfer coach who will facilitate these conversations that allows for regrets, resentments. The wealth transfer coach or wealth advisor will be there to make way for greater trust, understanding and new possibilities to work together in harmonious ways.