Author: Andrea Costa, Esq., Vice President, Estate Planning
Lately much is written on the ongoing uncertainty regarding whether a 2021 tax reform bill will significantly change the law of wealth transfer taxation. Advisors continue to make educated guesses and hedge their commentary with the phrase “but we just don’t know yet.” What we do know is that – regardless of the tax impact – the baby boomer generation has begun the greatest wealth transfer in modern history, which is expected to total approximately $70 trillion in gifts and inheritances between 2018 and 2042.1 Are the younger generations ready? What can we do to prepare them?
Young people have a different brain structure than adults. Research indicates that a young person’s prefrontal cortex, the part of the brain responsible for executive functions (see diagram below), does not fully develop until age 25. Prior to this age, adolescents rely on the emotional regions of their brains which can explain typical adolescent behaviors such as quickness to anger, intense mood swings and making decisions on the basis of “gut” feelings.2 A well-managed estate plan will evolve over time to accommodate changes in beneficiary maturity, family dynamics, tax code changes and asset mix fluctuations. An estate plan should be reviewed at least once every three to five years to accommodate these constantly changing factors but an estate plan alone will not fully prepare the next generation.
Beyond building supportive structures into estate planning documents, many clients struggle with the question of what to share and how to prepare the next generation to be responsible stewards of wealth. Setting aside time for a family meeting on an annual basis is an excellent way to be intentional about preparing the next generation to take the baton and continue your legacy. HORAN NextGen is an educational program for heirs (and if appropriate, the heirs’ partners) that can be a wonderful supplement to family meetings. This program is powered by HORAN WealthBeing, a unique financial wellness program that employers across the country unlock as part of their benefits package to position their retirement plan participants for success. HORAN NextGen starts at the foundation of financial wellness – the budget – and guides young adults through the core concepts of investing to understand and habits for financial success. The best time to start this type of development program is well before the actual transfer of wealth occurs while the older generation can sit in the room with your advisory team to add color with family stories and help facilitate the discussion.
If you're interested in learning more about the NextGen program, please fill out the brief form below to have a HORAN representative reach out to you with more information.
2013, Arain et al., publisher and licensee Dove Medical Press Ltd, Figure 3. A diagram illustrating the developmental regulation of executive functions by the prefrontal cortex, which remains under construction during adolescence and through at least age 25.
1. See Ben Eisen & Anne Tergesen article entitled, “Older Americans Stockpiled a Record $35 Trillion. The Time Has Come to Give It Away,” published in The Wall Street Journal on July 2, 2021.
2. See Arain M, Haque M, Johal L, Mathur P, Nel W, Rais A, Sandhu R, Sharma S. Maturation of the adolescent brain. Neuropsychiatr Dis Treat. 2013;9:449-461 (https://doi.org/10.2147/NDT.S39776).
The content of this blog is offered by HORAN Wealth Management, an SEC registered investment advisor. Ms. Costa is an employee of HORAN and a recognized expert in Estate planning but does not manage investment advisory solutions. This information is not intended as legal advice or as a substitute for the particularized advice of your own counsel and should not be relied upon as such, as the advice appropriate for you will be dependent upon the particular facts and circumstances of your situation. The transmission or receipt of this information does not create an attorney-client relationship. We provide links to other sites that we believe may be useful or informative. These links to third-party sites or information are not intended as and should not be interpreted by you as constituting or implying our endorsement, sponsorship, or recommendation of the third-party information, products, or services found there. Neither the information nor any opinion expressed constitutes a solicitation to use our services or to purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HORAN and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.