Whether it’s you or a close friend, colleague or family member, odds are you know a woman who has inherited wealth from a parent or grandparent. When it comes to having discussions about inheritance, families are not only failing to discuss the specifics, in many cases they’re failing to discuss anything at all. So today we’re looking at the top 3 financial considerations for women inheriting wealth as well as some of the most commonly asked questions we hear from our clients.
Women Inheriting Wealth
We are currently experiencing the greatest wealth transfer in history as the Silent Generation and Baby Boomer populations are expected to transfer an estimated $30 to $68 trillion in wealth to their heirs over the coming years. “The Great Wealth Transfer” has been covered extensively in the media and online, but what you might not always hear about it is the disproportionate number of women inheriting that wealth.
By 2030, American women are expected to control much of the $30 trillion in financial assets that baby boomers will possess–a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.
With this transfer of wealth well underway, women are faced with decisions and options that will have a lasting impact upon their family and future. Seeking the guidance of trusted advisors during this time is important in order to create a balanced and cohesive plan for both present and future generations.
Top 3 Considerations after Inheriting Wealth
When preparing for the unique considerations of wealth stewardship, here are the top 3 most important things to keep in mind.
KNOW WHERE YOU STAND
Before you begin making decisions about managing your inherited wealth, it’s critical that you have an accurate understanding of your net worth and cash flow needs. Working with your accountant, tax advisor, and financial advisor, document all of your assets and their values.
Your team of trusted professionals can help you identify and maintain all of the documentation needed and manage the substantial administrative burden of wealth transfer. Not only do you need to ensure that you have copies of all the important paperwork needed, you also need to be certain they are reviewed for accuracy and completeness. As well, you should store them securely with instructions for legal and financial counsel in the event something happens to you.
After establishing a clear picture of your net worth and assets, you’ll need to determine your cash flow needs. Going through your monthly and annual income and expenditures, and classifying expenses as needs, wants, or wishes, can assist you in understanding the wealth you may have available for gifting or philanthropic wishes as well as what you will need for the life you wish to live.
CONSIDER THE IMPLICATIONS
There are many variables that play into the tax considerations of inheritance. It’s a complex process that should be guided by your team of advisors working together to minimize the tax burden on you and your family. With changing laws and many options available, seeking the advice of trusted professionals is of utmost importance.
DECIDING ON YOUR LEGACY
Once you have determined your full financial picture and identified your needs, wants, and wishes, the focus can shift to stewardship of wealth. Whether you are approaching retirement or in transition, an understanding of expected net worth upon your or your loved one’s passing can be the conversation catalyst for lifetime gifting or philanthropic wish fulfillment.
Working with your family to prepare the next generation will help to ensure the lasting impact of the gifts you have received and plan to transfer to your heirs. Your wealth manager can guide you through the important conversations to have with your family around the stewardship of intergenerational wealth and basic financial literacy.
Commonly Asked Questions about Inherited Wealth
- Someone I know lost a large portion of their inheritance to taxes, and I want to be sure I avoid the same outcome. We’ll help you understand the tax implications of your inheritance and identify strategies to protect your inherited wealth.
- How do I ensure I don’t unintentionally disinherit my kids? It happens more often than it should, and you need to know the steps to take to ensure your wishes are followed and your loved ones are protected.
- Can I, and should I, make gifts to my kids? What about gifts to charities? Strategies for gift giving are important to understand and should be considered within both your financial and estate plans.
- My Trust is old, and I want to know if it still functions as it should under current law? Estate laws have changed in the last several years, and it would be prudent to review the structure of your Trust.
- Is my Trust funded correctly?
- Should I pay off my house? Should I buy a second or vacation home?
- Who should I appoint as my successor trustee? You need to appoint someone to be your successor trustee; this is an individual who will look after your financial affairs in the event of serious illness and after your passing. We’ll help you and your loved ones understand what this role involves so you know your family is taken care of.
- Should my estate attorney and tax advisor collaborate with my financial advisor? Absolutely. Ensuring your estate plan dovetails with your financial plan is a critical aspect of managing inherited wealth that often goes overlooked. We’ll collaborate with the other members of your team of professional advisors to help you put together a plan for the transfer of your wealth that takes into consideration tax implications and clearly identifies who carries various responsibilities for your affairs down the road. We’ll help guide you through the process and ensure your assets go where you wish.
Whether you are facing the challenge of how to best manage a recent or upcoming inheritance or planning for the transfer of your wealth to the next generation, we are here to help. Allow our team of legacy planning experts to help you put together a plan today to protect those you love now and in the future.
We can help you:
- KNOW WHERE YOU STAND SO YOU KNOW YOUR OPTIONS
Determine your full financial picture so that you understand all the different planning options.
- CONSIDER THE IMPLICATIONS
What are the potential tax considerations? How do you minimize your tax burden?
- DECIDE ON YOUR LEGACY
What have you received, and what are your responsibilities with that wealth? How do you want your family’s wealth to be used, and how do you best plan for that and prepare your family for the responsibilities they’ll face in the future?
Here at California Wealth Transitions, we specialize in helping women who are facing some of life’s most challenging financial transitions. We have extensive experience in providing expert advice for widows who are navigating the loss of their spouse and the changes to their financial situation that entails. Give us a call or request to speak with an advisor today. We’re here to help.
 McKinsey PriceMetrix, 2019. PriceMetrix is an integrated data and business intelligence platform for the wealth management industry. This analysis includes US industry surveyed households with $100,000 to $10 million in personal investable assets. https://www.mckinsey.com