New Things to Know About Creating Generational Wealth | Getting Ahead of The Great Wealth Transfer

in this second episode of our special series, Getting Ahead of The Great Wealth Transfer, WHZ partners James Zahansky, Laurence Hale, and Leisl Langevin, along with KKC Law partner Allison Poirier share how tax law and financial policy is changing all the time and that is certainly true now, as the Great Wealth Transfer gets underway.

Find out how the latest changes could affect your and your family's wealth so you can put the right measures in place to not just keep your generational wealth, but grow it.

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Transcript

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Sam Hello, and welcome back to You & Your Money, and our special series on getting ahead of The Great Wealth Transfer. I'm Jim Zahansky, senior partner and chief strategist at WHZ Strategic Wealth Advisors. I'm Laisl Langevin, Joining me is WHZ senior partner Managing Partner Advisory at WHC. and chief Investment Officer, I'm Lawrence Hale, Lawrence Hale, Senior Partner and Chief WHZ managing partner of Investment Officer at WHC. advisory, Liza Langevin, And I'm attorney Alison Porier, and attorney Allison Poirier partner at KKC Law. from Welcome. Together, we'll take you through everything you need to know about the great wealth transfer and how to prepare. So, let's get into it. Last time, we talked about the sheer scope of The Great Wealth Transfer, with around 84 trillion set to change hands over the next couple of decades, and what individuals and families should do to prepare for that in order to keep their wealth in the family. In this particular episode we're gonna explore what's really new about generational wealth, beyond the dollars, but really what's changing in mindset, policy, investing, and family dynamics, and how you can prepare accordingly. So, Liza, in your role as managing partner for advisory at WHZ, I'm sure these are conversations you and your team have had all the time. Yeah. We, absolutely, and so we've had a lot of conversations. Again, when that wealth is transferring to the next generation, there's a whole set of new values and ideas on how to invest in, especially for those next younger generations. Millennials and Gen Z, they often want to invest in things that are purposeful or have meaning. Find that they are more inclined to invest or have an ESG bent, so an environmental, social, and governance bent. And our younger clients, so they care more about having that financial freedom to be able to have the lifestyle that they want, so we see a lot more travel goals now versus in retirement in that younger generation, and those types of things. And so it's definitely a shift and can mean different things for investments and how we put portfolios together. Yeah, and there's a lot of changing family dynamics as well, Liza. That, you know, couples may not be getting married, or they may be getting married later. Often with families you have, you know, whether it's a matriarch or patriarch who may be you know, sort of directing what's going on in the family, that's changing as well. And there are more complex assets that people are dealing with, whether they be businesses, real estate, or other types of assets. So you know, it's important, especially for the younger generation and younger heirs, to have their values felt as well and a lot of their values are around transparency, and they want to get started with these conversations earlier. So making sure that there is some marriage between the older generation maybe leaving assets and the younger generation matching those values and having those conversations. Yeah, and from an estate planning context, it's so helpful to bring those generations, those younger generations in early so there's not a big surprise. Because a lot of times they may know kind of a balance of,"This is what I'm gonna get," not understanding it might be real estate, it might be an operating business. Mm-hmm. so making sure they're aware of that structure, making sure they're ready for that. And if they're if they're not really ready to manage that solo, putting some kind of safeguards in place. Maybe some trusts or some people to help manage that manage that inheritance for them in the system and help them make it more successful. Yeah, it's not often that you have a family where they may have multiple children and all children are capable of managing assets or making decisions at the same level, either through experience, education, or background. And there are different family dynamics at play. Another thing that, you know, we're seeing that Liza had mentioned is, you know, values being,... shown through in how people are choosing to invest. She had mentioned ESG or environmentally and socially responsible investing. A lot of exclusionary investing, where some people may not want to own certain industries within their portfolios because of their values as well as more complex assets like alternative investments real estate. And also a big driver of change is technology, you know, understanding how this younger generation who may be receiving these assets can interact with Mm-hmm.... through tech-driven platforms and make sure that they're involved in the process. Mm-hmm. Yeah, I mean, and the normal idea of someone inheriting some money that allows the inheritor to think through these choices that, you know, Lawrence might be talking about on the investment side, Allison on the legal side. But there are basics that generally are the same, right? I mean, in the end, you don't wanna own all technology stocks, right? You, you know, idea of having a diversified investment strategy generally has its merits over the long term. Cost controls. Where are you spending your money? If you spend all of the inheritance in two years, you likely didn't make it last your whole life if that was your goal. You know, and the the other thing that, that happens is really sort of what are the behaviors that the inheritor changes or goes through when they receive the money? And, you know, having that structure in a financial plan that comes from some legal document that's, that's drafted. A financial plan generally gives someone the right, the idea of what are they gonna spend the money on? How much does it cost as people age? And does it meet their own goals? Mm-hmm. And one of the things I think a lot of people don't like to think about is everybody thinks they're gonna pass away when they're 80 or they're 90, and everybody's gonna be heroic, responsible. But as we know, that's not what always happens. So then a very uncomfortable conversation that I really try to have with all my clients is,"I know you don't wanna think about it, but what if you pass away tomorrow?" Mm-hmm. Yes, your kids may be over 18 so legally, they can inherit assets, but how do you feel about your 19-year-old getting a million dollars? is their first call gonna be to, you know, the financial advisor or is it gonna be to the Lamborghini dealership? So thinking about not only best case scenarios but worst case scenarios. Maybe the best case there is they contact both. We will empower them to buy the Lamborghini and then... Probably wouldn't recommend that. Could be fun. I, you know, I think the family dynamics are also something I'm sure that, that I know we've all seen in, in our, our practices and works with, with client is, you know, when people inherit money, different family dynamics can come out, and particularly when things aren't clear I'm sure that Allison and your work in drafting some of these documents, clarity is key. Yeah, and just because it can not only clarity in the documents, so yes, one kid always thought,"Well, I was living with mom and dad, so I'm gonna be the one that takes over." But not understanding they might have been great at the day-to-day doctor's appointments and, you know, cooking the meals, but the idea of filing a bunch of paperwork isn't their strong suit. So yeah. Kind of recognizing who's gonna do what and not just the oldest child or the one living with mom and Mm-hmm. I think is very important. Mm-hmm. But yeah, I, and just to go back to an earlier point that Jim made about we take a holistic approach with our clients, so they have a financial plan, they get an investment strategy that's tied to their values and also their risk tolerance, and then we're working together and collaborating with accountants and great attorneys like Allison's team to help make that holistic approach really work and make sure it comes together and meets their needs and it meets what their values and, and what they're looking to accomplish as well. So it, it's a holistic view into their entire picture, financial, legal, making sure that it is all operating in the right ways. And to pick that up I mean, in the sense that we've all been saying, you know, once you have this plan in place on, you know, legally you have some sort of legal document or trust set up that is related to your wishes and your financial plan is set up that way and, you know, your assets are titled the right way, I mean, it gives you a great opportunity to provide some financial literacy to the next generation, to have some conversations that say,"You might inherit this amount of money in this manner-" Mm-hmm. and this is what it means to you." And all of those, those opportunities really empower the next generation to be as smart or smarter than you. Mm-hmm. And I actually, on that point, I'm seeing a lot more clients that are nearing retirement, they're in their 50s, and they want to include their next generation in these conversations because they said they never had that opportunity, and so I think that's a really cool shift it's... it used to be that the you know, the parents had the meeting and they never spoke about their money, and now we're seeing clients are including their children, they're in their, some of them, in their 20s, and they're being included in these conversations, so that's pretty, pretty neat. Yeah, I think it, it can be, you know taxes, politics, and, and,... money or verboten conversation topics. It's really critical that, you know. And I think making sure that you're having a open conversation and respecting different generational values and individual values as well because just because parents want such and such to happen, that may, that may not meet the lifestyle or the needs or the family dynamics of what their children or whoever may be inheriting it. Mm-hmm. Yeah, and I think that's a good point too. Some of my clients who are, are still maybe a little bit of the mindset of, "Oh, well, I'm putting this plan together but the kids don't need to know, and they don't need to know what I did with my money." It's refreshing to see more and more clients coming in saying,"I'm talking to my, you know, 20-year-old just got his first job, and you should start that 401 . Or kind of here's what we did, and yeah, we, we did this so maybe you guys want to kind of start talking about that, or start talking with our advisor and kind of, you know, start with your own wealth planning." I find it's a really nice shift and not so much a taboo topic where it's like,"Okay, we're, we have money but we don't talk about it." Yeah, and the, the idea of these whether they're formal in, or informal conversations about a family communication or a family conversation, it's something we encourage often at WHD. You know, it doesn't happen every time you say it but in essence, you know, we really believe in that communication plan because again if you go back just to sort of the dollars that are gonna transfer, that's one thing. How it's done to be sure the next generation understands it, to be understanding the next generation is able to, to manage it in their own life and has the right plan in place all starts as Lauren said earlier too, probably earlier than you think. You don't have to be you know, having, you don't have to be dead to have this happen. It, it actually makes better sense to do it now. And, and those early, early conversations, Jim, I think can shed some light for the people leaving assets to the next generation on whether or not the next generation's prepared and if they're going to follow through with their wishes if they ha-have, want to have a level of control, and I think that's something which Allison you hear all the time in your practices, well, I, you know, had a conversation with my son or daughter and they said they're going to, you know, buy that Lamborghini And, and the parents may not see that as the most mo-most, important thing. It may be more geared towards education or something. So how do, how do you typically address those kinds of issues? Yeah, well, first we, we encourage folks to have those conversations or at the very least just look at their kids very honestly and say,"You know, can you, do I really think you can handle this? Or if you're really tempted, do I think you're gonna be able to resist?" And a lot of times, I mean with kids are younger the, the answer is just naturally, well, maybe not right now'cause they're, they're just not old enough. They haven't had a lot of experience with those pressures of managing money. So we talk a lot more with clients about, "Okay, well, you can still leave money and leave assets to your kids or your, you know, your grandkids, whoever the beneficiaries are but maybe more again with a trust so they have access but not direct ownership." So at least for a period of time, maybe until they get a little bit older you know, they have some kind of guard rails in place. And to the point I think, Liz, that you had made earlier about kind of continuing to review these plans though, because right now my kids are very little so I have all types of trusts and plans in place just 'cause they're minors and it's gonna be a very long time'til they're even 18, so there's a lot more structure in place. But as they get older, we're gonna get a better sense of who they're growing in to be, or growin-, growing up to be. Are they gonna be responsible? Mm-hmm. Maybe the answer is yes and we can take some of those guard rails off. Maybe the answer is,"Oh God no, I hate to married." So let's keep these in trusts, our trust in place for longer. So it's also so important to be kind of very honest about with yourself about who the beneficiaries are in continuing to re-evaluate that. It's so true. I mean, the documents you're describing, the legal, you know, someone thinks how they go to set up a trust, but along the way, you know, their values might change, how they're educating the next generation might change. You describing how, you know, legal documents can adapt, how they can change. That, so you know, sort of being one and done is likely not the case when you're building a generational wealth plan. It's something you need to revisit often to be sure it still reflects your values, still is adapting to the changes you want in your life and, and beyond it. And something we, we haven't really touched on but making sure that if you're in a couple well married couple, making sure they're on the same page You know, I think that's, we, we've sort of taken that as a given but you don't know, we don't know. We just have clients come in and, and the husband and the wife feel that they are, you know, have the same one way want to leave assets to the children in this way and the other way may, may have a very different view of that. So making sure that again through those conversations early that you're coming up with the right plan that fits everyone's important points Mm-hmm. Yeah. So obviously some, some takeaways from this part of the conversation that relates not just to the dollar amount but more sort of the behavioral approach, the values approach to the generational wealth. I mean, we've spoken about you sort of have to have a map for the future whether that's your financial plan and your estate plan together. I mean, that could be your map and remember that that map oftentimes change. It's changing from you reading the old Hagstrom to now there's GPS and you can pretty much go everywhere. So you sort of have to think about that map changing. You know, you have to make sure your household is aligned. Really what, what that means is, you know perhaps you know, your values may be portrayed in the estate plan and the financial plan or, or your your, your significant others, or your partners. Are they in there? Is it the people inheriting in that? Is that that household plan? You know, you also have to sort of look to be sure that your assets are in the plan and also be sure that the non-traditional assets, like do you have collectables or ... You know how many times clients tell us, "Hey, I have these antiques." All of these things mean ...... you know, different things to an estate plan that need to be considered. How do people inherit that? How do you value those things? And I think that's the non-traditional asset review that needs to be included. And then lastly, something we all spoke of, really important is, you know, sort of what's the governance structure of that and how do I communicate it so that my wishes are, you know, being shared with the family but there's some governance structure in legal documents and the way I've titled assets to be sure that they are executed when I'm, when I'm not here? So lots for people to think about. I don't know if you got anything, anyone, but those seem to be really, really good steps at least from the financial planning point of view. Anything else to add? Mm-hmm. Yeah, so the map clearly is so important. Get your plan in place, get that set up. But then, to something we've been chatting about, but reevaluate it. Estate planning, I always remember this old infomercial from like the'90s that was like,"Set it and forget it." And it's ... that's not what estate planning should be. Major life events should always prompt you to take another look at the plan, make sure it's still working. Assets have changed dramatically. There's new family members, like the birth of kids, grandkids. People have now gotten divorced, people have passed away. It can impact things not only like who the beneficiaries are gonna be but who are your executors? Who are your trustees? Who's gonna be the guardian for, for minor children? So continuity... Continuing to take a look at the plan as the years go on and don't just think of it as a one and done planning opportunity. Also thinking about lifelong strategies or kind of strategies you can implement now. Like you say, you don't have to wait until you've died for these things to take effect. Maybe looking at doing annual gifting. Maybe looking at chatting with advisors and setting up donor advised funds again if you're philanthropically inclined. Our... Your assets are changing. There's, you know... I, I'm not gonna pretend that I'm very well versed in this, but cryptocurrencies before, which I'm you guys love it but people want to invest in those. But to the extent people have these assets estate planning laws changed to specifically address how those types of assets are handled. So again, continuing to update the plan to reflect changes in your life and changes in your assets. Mm-hmm Yeah. So plan, plan, plan. Yeah. It's like, if you think about how long you might be planning for your next vacation. Yeah. Are you spending the same amount of time planning for your estate and, and, and your finances? I, I don't know. I think a lot of people don't necessarily do that. No. Yeah. Thanks, everyone. That was great conversation. And so now we'll turn to women inheriting as part of this$84 trillion shift in, in women's wealth and what that means and how planning must respond. Sam sa.