Generational Wealth – Your Choices Could Impact Your Family For Generations

What does it mean to pass down wealth? If you have invested in stocks, bonds or other assets, or are building equity in real estate or a business you own, then generational wealth can look like many different things. One Federal Reserve estimate suggests that over 2 million households receive some inheritance.

When planning for the future, it can be good to remember ways you can pass down your wealth if you choose and do so with confidence.

Generational wealth refers to financial assets passed from one generation of a family to another. Many families tend to pass down assets and other valuable items when a death occurs, but this doesn’t have to be the only time you make such transfers.

A creative way to transfer generational wealth is through gifts. As of 2023, individuals may gift up to $17,000 and couples up to $34,000 annually in either money or property without incurring the federal gift tax.

Tuition paid directly to an educational institution is also exempt from gift taxes, so this is another way to help the next generation. Like tuition, eligible medical expenses paid directly to the provider are also exempt from gift tax.

Building generational wealth takes time but can benefit your family and loved ones. Here are several ways to start building generational wealth:

Improve Your Financial Literacy

Once you have a strong understanding of your finances, budgeting, credit score and savings, you will be able to make better choices when building your generational wealth.

Pay Down Your Debt

There are various options for paying back debt, and understanding how your debt impacts your finances is one of the first steps. It may be time to look into setting aside an emergency fund for the unexpected and getting on track with a debt-repayment strategy.

Focus on Budgeting

Knowing how much money is coming in and how much money is going out is a great starting point for building your budget. By planning ahead, your budget can accommodate wants, needs and unexpected expenses.

Create Goals

Consider your short-term and longterm financial goals to set a reasonable timeline. These goals may include retirement savings, insurance policies, investments and emergency funds. We can help you look at where you stand in relation to your goals and help you craft a financial strategy.

Plan for the Next Generation

Keep the next generation in mind while you plan, determining which vehicles you’d like to use to pass wealth to heirs, for example educational savings accounts or tuition payments; wills or trust funds; or insurance policies.

Take Your Financial Pulse

Financial plans aren’t permanent, so revisit your budgets and plans regularly, especially if you experience a life change. This will help you build toward your generational goals.

“Generational wealth can open many doors for your family, but planning ahead is key.”

If you are considering giving valuable items, property or funds to family members, remember that there are options for those transitions. Whether you are just starting to think about generational wealth, just starting to build it or you’ve been growing your assets for years, a plan can help keep you on track.

Sources:

1,5 Capital One. Jan. 5, 2023. “What is generational wealth?” https:// www.capitalone.com/learn-grow/money-management/what-is-generationalwealth/. Accessed April 26, 2023.

2,4 Greg Daugherty. Investopedia. Dec. 21, 2022. “Generational Wealth: Overview, Examples and FAQs.” https://www.investopedia.com/generationalwealth-definition-5189580. Accessed April 26, 2023.

3 IRS. Oct. 27, 2022. “Frequently Asked Questions on Gift Taxes.” https://www. irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes. Accessed April, 26, 2023

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