The largest intergenerational transfer of wealth in history is underway, and people are not prepared, according to Michael Pelzar, head of investments at Bank of America Private Bank.
“Nearly half of wealthy families do not have the basic elements of estate planning in place,” Belzar said. “This means families are not adequately prepared for the wealth transfer that will occur.”
This disease is expected to be passed on to the baby boom generation alone. 68 trillion dollars Over the coming years. However, Belzar explained that nearly half of wealthy families do not have the necessary arrangements, such as a will, power of attorney, or health care power of attorney, to allow for easy inheritance.
“When problems arise with the transfer of wealth from one generation to the next, it’s when communication breaks down or doesn’t happen at all,” Belzar said. “People aren’t educated about the value and benefits of trust.”
Christina Lekholop, a certified financial planner at CapTrust, attributes this lack of movement on estate planning to the “expanding and complex” world of investing, a shift in the definition of retirement, a changing understanding of jobs, and the geopolitical climate.
“People tend to procrastinate because of uncertainty,” says Lekolop. “There are a lot of headlines. There is a lot of noise that can tell people not to take action when I think they should. While all of that is a very real consideration to be aware of, it’s also important to get started, and when people hold back, they miss out on opportunities.”
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Lekhulub emphasized the benefits of working with a professional to help understand financial matters and set goals and priorities that help inform investment decisions.
“Having a plan, even as simple as replacing my income when I’m 65, is a great starting point,” says Lekolop. “From there, you can figure out, ‘How much do I need to save? What growth rate do I need? How many years do I need to save?’ There are some really simple things, and then you can add layers of them as you go along.”
“It is important to start somewhere with goals, and then when you invest, invest with a purpose. Know what you are investing for, choose the right tools, and understand those tools well,” Lekolob continued.
This kind of planning can help prepare people for smoother transitions and help avoid passing “conflict” on to other generations, Belzar said.
“No generation wants to pass problems on to the next generation, so what matters is that we have the right planning, and we do the right communication and education in advance,” Belzar said.
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