What is Generational Wealth?

As the name implies, “generational wealth” is the wealth that transfers from generation to generation. Think of “old money” families whose generational wealth allowed members of the younger generations to run for office, start businesses, invest in startups, and create family charities.

How May You Build Generational Wealth?

Building generational wealth may come from various sources, such as a job, a career, a business, or passive income like royalties or dividends.

After generating enough income to cover your monthly expenses, you might consider ways to use your extra income to build assets for a potential future source of wealth. Some income sources include:

• Investing in blue chip or dividend-paying stocks
• Purchasing rental real estate
• Creating something that pays royalties, like self-published books or a social media channel
• Starting a side business

The more sources and forms of income you have available, the more funds you may have to begin building generational wealth, even at a young age.

Dos and Don’ts

There are a few “dos and don’ts” when planning an estate to create and hopefully preserve generational wealth.

• DO: Talk to a financial professional.
  Navigating the complexities of investing and tax implications might be tricky, and a single misstep may cost you dearly. Having a financial professional review your portfolio and recommend some options may help you save more now to provide more income later.

Meet with a Choice Wealth Financial Professional

• DO: Diversify your portfolio and assets.
  Investing in only a particular asset or sector may leave you vulnerable to market volatility. Suppose you depend on some of these funds to provide you with income in the future. In a downturn, you might sell assets at a loss to stay even. Diversifying your portfolio and managing over-exposure to any particular asset or sector may help avoid major market losses and hopefully help your portfolio maintain its value during periods of high inflation.
• DON’T: Ignore tax considerations.
  When it comes to building wealth, it is often not how much you earn but how much you keep. Your financial professional may help you manage tax efficiency for your assets, working toward the goal of preserving and reinvesting more of what you earn. These considerations may mean putting assets in a trust, or investing income in an individual retirement account (IRA).

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

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Knowing about these taxes, who pays them, and how the process works may make a challenging moment less stressful. Here’s an explanation about how estate and inheritance taxes work.

Estate and Inheritance Taxes: What Are They?

Estate and inheritance taxes are both posthumous taxes on assets, but they’re two very different types of taxes.

Estate Tax
The estate tax is the amount of the deceased’s estate paid to the state or federal government before the remainder of the estate passes to the heirs. The estate’s executor (also called the administrator) pays this tax before anything goes to the heirs. The executor must submit the estate tax return and pay any taxes.

• Who needs to pay estate taxes?
  Estate taxes are due at the federal level if the deceased’s estate is worth more than a certain amount.

Inheritance Tax
An inheritance tax is a tax on the assets after their distribution to the beneficiaries. Beneficiaries may have to pay taxes on their share of the estate.

• Who must pay inheritance taxes?
  In contrast to estate taxes, inheritance taxes are paid by the heirs who inherit from the estate. Only a handful of states levy inheritance taxes, and the amount owed varies from one to the next. The states currently taxing inheritance are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.

Estate Taxes in Your State

Many states collect estate taxes, and exemption levels vary. Some states have far lower exemption thresholds than the federal government. State estate taxes might be due if the deceased lived in one of these states or had property in one of these states, even though the estate is exempt from federal estate taxes.

Exemption
The federal estate tax exemption in 2024 is $12.92 million. This exemption means there are no federal estate taxes to pay on an estate worth less than this amount. However, if the estate is worth over $12.92 million, the amount above the threshold is taxable.

How to Lower or Avoid Estate and Inheritance Taxes

You might be a little wary of estate or inheritance taxes, but there are ways to avoid or manage them. With proper planning, you may leave more of your fortune to your loved ones rather than paying taxes to the government.

• Use the Annual Gift Tax Exclusion
  You may give a portion of your estate to someone every year without having it count toward your lifetime estate tax exemption. The gift tax exclusion in 2024 is $17,000 per recipient annually. This exclusion means you may gift as much as $17,000 per person to as many people as you want without the risk of paying any gift tax.
• Use Trusts
  Trusts are the most common means of guarding wealth. Some trusts, such as an irrevocable life insurance trust (ILIT), remove life insurance proceeds from your taxable estate. Others, such as a Charitable Remainder Trust (CRT), help you to leave things to charity while managing your taxable estate.
• Use the Marital Deduction
  If married, under the unlimited marital deduction, you may give your spouse assets without any tax penalty. This strategy delays any estate tax until the surviving spouse dies.
• Spend Down Your Estate
  Another way to make your estate go down is to pay down your estate while you’re still alive. You may give things to your heirs, pay school fees or medical bills, or just invest in your lifestyle to enjoy your fortune and save on your estate tax bill.

Seek Professional Help

Estate and inheritance taxes may be complex – especially for estates with significant assets. State tax regulations differ, and there are several options to choose from. You may want to work with a tax professional or estate planner to help you understand what to do and devise a plan that works for your family.

Meet with a Choice Wealth Team Member

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by WriterAccess.

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Before their children leave for college, parents must engage in estate planning measures to help provide legal protection for their children and potentially save their estate from future legal challenges. This article examines vital documents parents must include in their estate plans before their child’s first year of college.

Healthcare Proxy

A Healthcare Proxy, often called a Healthcare Power of Attorney, is a crucial estate planning document. Suppose the parents were to become incapable due to illness or accident. In that case, this legal document allows a designated person (typically the other parent or trusted adult) to make medical decisions on their behalf. Without a healthcare proxy in place, their college-age child may need to go through legal channels to be allowed to make vital healthcare decisions for incapacitated parents, resulting in delays during a potentially critical time.

Durable Power of Attorney/Financial Power of Attorney

Next is the Durable Power of Attorney (POA), also known as a Financial Power of Attorney. This legal document gives a designated person control over someone else’s financial and legal affairs if they cannot manage it themselves. These financial affairs typically involve paying bills, managing bank accounts, signing tax returns, etc. A financial POA can allow their college-age student to intervene and manage these matters seamlessly without any legal roadblocks, should the need arise.

Advance Directives

While it may seem morbid to consider, it’s important to discuss medical and end-of-life care even with college-age children. Advance directives contain instructions about the kind of medical treatments one would like if they cannot express their wishes. This legal document helps to avoid unnecessary suffering, mitigate confusion and disputes about treatment choices, and respect an individual’s autonomy when receiving care.

Last Will

Having a will is not just about distributing your assets after your death; it includes a range of aspects that can significantly influence the lives of your college-age children. Here are some reasons why parents should consider a last will.

1. Financial Preservation
   The first crucial reason to have a will is for financial preservation. Parents are often the primary providers for their college-age children. If something were to happen to the parents without a will, the distribution of their assets could become complicated and prolonged, leaving the children in a difficult financial situation. While this situation is typically considered for minors, it can also be relevant for young adults who are not yet fully self-sufficient and unable to pay for college or living expenses.
2. Uphold Parental Wishes and Values
   Secondly, having a will can help uphold the parents’ specific wishes and values. Clear instructions can help eliminate any potential disagreements or misunderstandings about intent. A will can establish an educational trust, enforce responsible financial behavior, and even give direction about personal belongings and mementos.
3. Teach the Importance of Planning
   Last, creating a will can teach your college-age children an important life lesson about the importance of future planning. By involving them in this process, they can get firsthand experience about how to manage their affairs when they become independent.

In conclusion, ensuring legal safeguards should be on every parent’s checklist and part of their estate plan before their children leave for college. Consulting with financial and legal professionals specializing in estate planning can provide comprehensive guidance on appropriately including your college-age children. Remember, proper planning today ensures financial independence for tomorrow.

We would love to meet with you about your estate planning

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #588887

Sources:

https://www.findlaw.com/forms/resources/estate-planning/reasons-estate-planning-is-important.html

https://www.investopedia.com/articles/pf/07/estate_plan_checklist.asp

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For clients with dependents or loved ones who receive public benefits, an SNT can offer peace of mind and financial safety.

Benefits of a Special Needs Trust

1. Preserving Public Benefits

One of the primary advantages of an SNT is its ability to preserve the beneficiary’s eligibility for needs-based public benefits such as Supplemental Security Income (SSI) and Medicaid. Receiving an inheritance directly can disqualify individuals from these crucial benefits due to asset limits.

However, by placing the inheritance in an SNT, the beneficiary can continue to receive public assistance. Importantly, the funds in the SNT are used to supplement, not replace, the benefits provided by public programs.

2. Controlled Access to Inherited Funds

An SNT does not provide the beneficiary with direct access to the inheritance. Instead, the funds are managed by a trustee, who oversees the trust and disburses funds according to the trust’s terms. This arrangement ensures that the client maintains control over the distribution and use of the funds, both during their lifetime and after their death. It also protects the assets from being misused or squandered by the beneficiary.

3. Appointment of a Trusted Trustee

Clients can appoint a trusted individual or a professional fiduciary to manage the SNT. The trustee is responsible for ensuring that the funds are used for the beneficiary’s benefit, according to the trust’s terms. This can include paying for medical expenses, education, personal care, and other needs not covered by public benefits. By appointing a reliable trustee, clients can ensure that their loved ones are well cared for and that the funds are managed prudently.

4. Protection of Trust Assets

Upon the beneficiary’s death, the assets remaining in the SNT are not subject to reimbursement claims from state or federal agencies. Since the assets in the SNT never legally belonged to the beneficiary, they are protected from being used to repay benefits received. Instead, these assets can be directed to other beneficiaries designated by the client. This feature allows clients to ensure that their estate is distributed according to their wishes, even after the death of the SNT beneficiary.

Estate Planning Matters

Special Needs Trusts offer a vital solution for clients who want to provide for their loved ones without jeopardizing their public benefits. By establishing an SNT, clients can work toward several objectives

• Maintaining the beneficiary’s public assistance
• Ensuring controlled access to inherited funds
• Appointing a reliable trustee
• Preserving the trust assets from reimbursement claims

For investors and clients seeking to safeguard their family’s financial future, an SNT can be an essential component of their estate planning strategy.

Final Thoughts

As you consider the financial needs of your family, it’s crucial to understand the benefits and intricacies of Special Needs Trusts. Consulting with a financial professional or an estate planning attorney may provide personalized guidance and help you establish an SNT that aligns with your specific requirements and goals.

With the right planning, you can help your loved ones receive the support they need while preserving their access to essential public benefits.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by FMeX.

LPL Tracking #585958

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1. Participate in Estate Planning

A vital pillar for managing generational wealth transfer is thorough estate planning. Estate planning doesn’t just involve drafting a will; an estate plan should include provisions for the possible incapacity of the wealth owner, power of attorney, healthcare directives, and other appropriate documents for efficient wealth transfer. For high-net-worth individuals, it’s essential to incorporate trusts as part of the estate plan to help pursue the future control of assets.

2. Purchase Life Insurance

Life insurance is essential for generational wealth transfer because it allows one to leave a significant amount of money tax-free to heirs. Life insurance can also help cover estate taxes and provide liquidity when needed.

3. Plan for Taxes

Generational wealth involves a significant transfer of resources, which may be subject to various taxes. Therefore, understanding which taxes may impact an estate and strategically planning for taxes plays a pivotal role in preserving assets for the next generation. Consulting tax, legal, and financial professionals is essential, as they can help guide you through the tax planning process and various tax laws that pertain to your situation.

4. Diversify Portfolio Investments

A portfolio with diverse investments may help mitigate the risk of losing money. Variety in investment can help guard generational wealth so it is not as affected by changes in a single market occurrence. Engaging financial professionals to help manage these portfolios effectively may be beneficial.

5. Encourage Education and Mentorship

Financial education, mentorship, and training are critical when transferring wealth to the younger generation. Education helps the next generation comprehensively manage the wealth they inherit. Encourage taking financial literacy courses, attending financial workshops, and seeking help from financial professionals.

6. Define Philanthropic Goals

High-net-worth families often use philanthropy as a wealth transfer strategy. Besides tax breaks, philanthropy demonstrates passing on values to inheritors. Therefore, it’s essential to incorporate philanthropic goals into the wealth transfer plan alongside other financial wellness techniques.

7. Communicate

Making sure that everyone involved has a clear understanding of the owner’s wishes concerning generational wealth. Regular meetings help keep everyone updated on plans to transfer wealth and to whom. Also necessary is understanding wishes for care if benefactors become incapacitated, who is POA, and so on, which can help deter problems later and avoid family conflicts.

8. Engage Professionals

Engaging professionals in family meetings is beneficial for efficient communication and understanding among the parties involved. A team of financial, tax, trust, and estate legal professionals can provide recommendations based on the latest regulations, investment strategies, goals, and wealth transfer plans to help assets remain intact for heirs. We would love to talk with you about your financial plans.

Managing generational wealth is essential in preserving it for future generations. Part of developing financial wellness is emphasizing the importance of implementing these eight tips to help navigate the plan to transfer wealth into a more manageable goal.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which insurance product(s) or investment(s) may be appropriate for you, consult your financial professional prior to purchasing or investing.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by Fresh Finance.

LPL Tracking #502413-01

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Estate Planning Basics

There are five elements to address in an estate plan:

• A living will and healthcare power of attorney (POA)
• A last will and testament
• A trust (if necessary)
• A financial power of attorney
• A list of beneficiaries

These five factors can ensure that your health-related, financial-related, and asset-related wishes are carried out, even if you’re temporarily or permanently incapacitated.

Living Will and Healthcare POA

A healthcare Power of Attorney allows a designated person to make healthcare decisions on your behalf if you’re incapacitated, whether you’re undergoing emergency surgery or suffering from dementia. A living will sets out your end-of-life wishes, whether you want all possible lifesaving measures or have a do not resuscitate (DNR) order.

Some questions to ask yourself when drafting a living will include:

• What kind of medications would you like administered? (E.g. opioids, narcotics, blood pressure medications, etc.)
• If you’re unable to eat, do you want a feeding tube?
• Do you want to be on life support? If so, how long?
• Do you want a DNR order?
• Would you like to donate your organs?
• Do you want palliative or hospice care?

Although these aren’t necessarily pleasant questions to think about, they can help keep your loved ones from having to make difficult decisions during an incredibly difficult time.

Last Will and Testament

Your will allows the transfer of assets that make up your estate to your beneficiaries—children, grandchildren, spouses, siblings, or anyone else you’d like to leave assets after your death. It should include:

• A list of your beneficiaries
• A list of your major assets (bank accounts, properties, art, vehicles, and any other physical assets)
• A list of any debts
• A person you’d like to be appointed as the executor of your estate

Financial POA

A financial POA grants someone else the same level of control over your finances as a healthcare POA does over your physical health and medical treatment. A financial POA kicks in only when you’re not able to make financial decisions for yourself, whether temporarily or permanently. Your financial POA should be someone you trust to carry out your wishes. When you select a POA, it should be someone who is willing and capable of serving in this role, who lives near you, and who is trustworthy.

Designated Beneficiaries

Your designated beneficiaries should include everyone you’d like to provide for after you pass away. Some of the most common beneficiaries include:

• Your spouse
• Your children and/or stepchildren
• Your grandchildren
• Parents
• Siblings
• Nieces and nephews
• Close friends
• Charities

Over time, you may find that your desired beneficiaries shift; it’s worth revisiting your designated beneficiaries periodically to make sure they still reflect your wishes.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by WriterAccess.

LPL Tracking # 1-05351236.

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When you hit a certain age of your life, you may realize that one topic keeps coming up in conversations with your friends: care for aging parents. The concern isn’t just limited to health care, money management is also a big problem.

Parents aren’t likely to recognize their own declining abilities, so knowing when and how to step in to help is important. Here are some tips:

Watch for warning signs.

When visiting your parents, take a look around the house. Are there unpaid bills piling up on the counter? If the things that are normally done are not, it may be a red flag that your parents are struggling with the upkeep.

Be aware of the people in your parents’ lives.

Make sure that you have a list handy of people you can contact, and keep the lines of communication open. Friends, caregivers and church members can offer insight to any changes in your parents’ behavior. Don’t forget your parents’ professional contacts, such as their attorney, doctor, insurance agent and financial professional.

Be subtle.

Most people have a difficult time relinquishing control over their finances. Try offering guidance and help instead of taking over their finances completely.

Suggest that you can help balance their bank statements or set up online banking and automatic bill payments. This offers an excuse to start a discussion on their financial matters and helps relieve the stress on your parents to stay on top of everything. You can also start the conversation by purchasing a book about financial concerns and discuss the book with them.

Work with your siblings.

Sharing responsibility can be tricky, but keeping everyone in the loop is critical. If one sibling lives closer, in-person tasks may be easier for him or her. Set up monthly telephone meetings with siblings to make sure that everyone is aware of the situation and can make decisions together.

Prepare a power of attorney.

This is a form that authorizes you to make business or financial decisions on your parents’ behalf. If they are willing to sign and notarize a power of attorney, you have greater oversight of your parents’ finances. Make sure that you notify the family and that everyone knows who has power of attorney.

No one likes to lose independence. Helping your parents with this transition is difficult, but it’s in their best interest and yours.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

This article was prepared by AdviceIQ.

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When it comes to personal finance, there are a number of competing priorities that can make it difficult to determine where to focus your efforts. For many people, the choice between building emergency savings and working towards their retirement goals is one of the biggest dilemmas they face. So, which should you focus on first?

In order to answer this question, it’s important to understand what emergency savings and retirement goals are and why they are both important. Emergency savings refers to the amount of money you have set aside in a readily accessible account to cover unexpected expenses such as a job loss, medical emergency, or major home repair. Retirement goals, on the other hand, are the plans you have in place to provide for yourself financially once you stop working.

Both emergency savings and retirement goals are important, but the order in which you focus on them will depend on your individual financial situation. If you have a stable income and few financial obligations, you may be able to focus more on your retirement goals, knowing that you have a safety net in place in the form of your emergency savings. However, if you have limited income and high debt, you may need to prioritize building up your emergency savings in order to protect yourself from financial shocks.

Emergency Savings First

Here are a few reasons why emergency savings should come first:

1. Peace of mind. Having a solid emergency fund in place can help you sleep better at night, knowing that you have a safety net in case of an unexpected expense.
2. Protects against debt. If you don’t have emergency savings, you may turn to credit cards or loans to cover unexpected expenses, which can quickly spiral into debt. Building up your emergency savings can help you avoid this trap.
3. Provides flexibility. With an emergency fund in place, you have more flexibility to make decisions about your financial future, such as taking on a new job or starting a new business.

Retirement Goals First

However, there are also some good reasons why focusing on your retirement goals first can make sense:

1. Time value of money. The earlier you start saving for retirement, the more time your money has to grow, which can make a big difference in the amount you have saved when you retire.
2. Compound interest. The power of compound interest means that the earlier you start saving, the less you have to save each month in order to work towards your goals.
3. Employer matching. If you participate in a 401(k) or other retirement plan at work, your employer may match a portion of your contributions. By maximizing this match, you can significantly increase your retirement savings.

Emergency Savings vs. Retirement Goals

So, which should come first? Ultimately, the answer will depend on your individual financial situation and goals. In any case, it’s important to find a balance between the two. You don’t want to neglect your emergency savings and end up in debt when an unexpected expense arises, but you also don’t want to neglect your retirement savings and end up struggling to make ends meet in your later years. A good rule of thumb is to aim to have three to six months of living expenses in your emergency fund, and then start contributing to your retirement goals as soon as you can.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This article was prepared by FMeX.

LPL Tracking #1-05358627

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1. Keep an Eye on Your Budget

With inflation hitting nearly double digits since the COVID pandemic, those planning for a steady 2% to 3% per year have found themselves adjusting to significant increases in consumer prices. It is important to keep a close eye on your budget so that you may quickly make adjustments to your committed expenses or your savings withdrawal rates. Sometimes, you may even need to reevaluate when to claim Social Security payments.

2. Plan for Gifts

You may want to begin distributing your assets to your children and other loved ones so you may watch them enjoy your hard-earned money. And by providing these gifts during your lifetime, you may be able to manage the value of your estate enough to avoid any estate tax.

However, not all gifts are equal. It is important to have a gifting plan so that you and the recipient might get the most out of your financial gift—whether this means avoiding taxes or even setting up a “spendthrift trust” to manage the spending of the money.

3. Watch Out for Fraud

Scams continue to become more sophisticated. The older you get, the fewer defenses you may have against a well-prepared scam artist. Take advantage of the resources available to guard against fraud, such as multi-factor authentication or an encrypted password manager. Above all, do not click on links in an email you do not recognize, and do not make payments in gift cards or untraceable money transfers.

4. Set Specific Goals

Whether you want to fund a home improvement project or lower your expenses to prepare for a move, it is important for any goals you set to have specific parameters and to break the goals down into stages. Not only may this make it easier for you to assess progress, but it might help you identify what works — and what does not — when it comes to sticking to a financial goal.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by WriterAccess.

LPL Tracking #1-05361931

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Generational wealth encompasses financial assets with a monetary value. These include investments, real estate, land, cash, collectibles, etc., that are passed from generation to generation.

Why does wealth seem to disappear within three generations? Several reasons include:

• Mismanagement of wealth leading to an inheritance tax burden
• A growing family
• Spendthrifts
• Lack of financial education for those who are receiving the inheritance

If you have concerns about assets being passed down, please view our checklist and determine where you stand.

Do you participate in effective gifting?

Using the annual gift exclusion and lifetime exemption is an effective strategy for passing on wealth to beneficiaries without being subject to significant tax responsibilities. The gift tax exclusion for 2023 is $17,000. That means both parents are allowed to give someone up to $17,000 per year ($34,000 per person), to as many people as they want. Should any of their gifts happen to exceed the gift exclusion limit, the amount in excess will go toward the lifetime exclusion amount which is currently $12.92 million in 2023.

Are you familiar with how trusts work to preserve generational wealth?

Trusts are legal entities that preserve wealth and allow the issuer of the trust to distribute the wealth as they see fit. They mitigate the risk of beneficiaries losing assets through lawsuits, divorce, or unexpected occurrences, and trusts also provide certain tax incentives. They can help you avoid probate, provide for a disabled beneficiary, establish a spousal trust, and other benefits. There are a variety of options to choose from and it is encouraged that you consult a financial professional to help you determine what works best for you and your family. Some of these trusts include:

• Living trusts
• Charitable and Charitable Remainder trusts
• Testamentary trusts
• Dynasty trust
• Spendthrift trust
• Irrevocable trust

Are you teaching financial skills to the children who will inherit your wealth?

It is critical to teach children the value of saving and how to invest. This can help to preserve the wealth they will one day inherit. It is a common theme that beneficiaries who inherit wealth will be tempted to spend it. However, this may stem from the fact that they don’t understand how to make the money work for them. Parents can educate their children and grandchildren on investing in financial instruments like stocks, bonds, CDs, annuities, and real estate interests. They can walk them through preparing a budget, provide them with financial literacy books, and even consider granting them a small sum of money to practice money management (while the parents monitor their progress).

Do you know how taxes affect generational wealth as it is passed down?

Depending on the amount of assets distributed to beneficiaries, and the manner in which they are passed down, the act of giving may trigger a gift tax. There are several methods of giving that can help to lessen the tax burden including:

• Annual gifting
• Lifetime gift exclusion
• Charitable giving
• Taking capital losses to offset capital gains
• Deduct medical expenses that exceed 7.5% of your adjusted gross income
• Tax credits can be more beneficial than tax deductions as they lower your tax bill dollar for dollar as opposed to reducing your taxable income, like the plug-in electric vehicle credit and residential energy efficient property credit [iv]

Do your beneficiaries understand the value of compounding wealth?

The earlier they begin investing money, the more beneficial the compounding interest will work on their behalf. The idea is long-term growth. To take full advantage of compounding wealth you have to be patient. A few common ways of investing where your interest compounds over time include:

• Dividend stocks
• High-yield savings accounts
• Bonds and bond funds
• Certificates of deposit (CDs)
• Real estate investment trusts (REITs)
• Simple interest annuities

It is highly encouraged that you enlist the help of a financial professional to learn which investments would be appropriate for you and your family’s generational wealth distribution goals.

Is there a family member you want to help with education expenses?

A popular way to transfer wealth is by paying for a family member or friend’s education. With this strategy, the tuition is paid directly to the institution, which permits the giver to be exempt from gift taxes. Money used for books, room and board, and other educational expenses is not tax-exempt.

If the preservation of wealth over multiple generations is a plan that you are interested in exploring, consider consulting a financial professional who can help you design a strategy to pursue your financial goals.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

An increase in interest rates may cause the price of bonds and bond mutual funds to decline.

CDs are FDIC Insured and offer a fixed rate of return if held to maturity.

Non-traded Real Estate Investment Trusts (REITs) invest in commercial real estate or real estate related debt, but unlike exchange-traded REITs are not listed on a national securities exchange. Non-traded REITs differ from exchange-traded products with similar strategies, and can carry significant risk that should be understood prior to investing. Significant risks include, but are not limited to: sector concentration, geographic, illiquidity, interest rate, change in governmental, tax, real estate, and zoning laws, and debt. Alternative investments, including REITs, may not be suitable for all investors, and the strategies employed in the management of alternative investments may accelerate the velocity of potential loss.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions

LPL Tracking # 1-05361300

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