Lessons to apply today from the predicted inheritance boom

In recent posts, we’ve discussed several recent changes to estate law. Today’s post addresses a concept called the inheritance boom.

The term refers to the wave of inheritance transfers expected from aging baby boomers. That demographic has now reached retirement age, and estates will be created upon their passing. Some commentators expect that wealth transfers from baby boomers will comprise a higher proportion of net worth, and possibly affect the country’s wealth demographics.

Specifically, some commentators predict greater wealth inequality from the inheritance boom, starting around the year 2031. Of course, many variables could affect that prediction. An attorney that specializes in estate planning knows that many individuals include charitable giving in their wills or estate documents. A wealthy individual may also consume most of his or her financial worth before passing away through luxury expenses, gifts and/or philanthropy.

For individuals concerned about minimizing estate tax and avoiding the expenses associated with probate, an attorney that specializes in estate planning may have helpful strategies. For example, intervivos gifts can be one way to assist children or loved ones with educational or other expenses. Such transfers will not be considered part of the estate if they were made during the grantor’s lifetime. In addition, there is a tax reduction for the donor: For 2014, the first $14,000 of gift property per recipient falls within the annual exclusion from federal gift taxes.

Of course, there are many more estate planning options available, including wills, revocable and irrevocable trusts. An attorney can also run calculations to help individuals anticipated their estimated estate tax liability, in order to plan accordingly.

Source: New York Times, “What Comes After Rich Baby Boomers? Kids With a Big Inheritance,” Annie Lowrey, March 11, 2014