The biggest wealth transfer in the history of the U.S. has started, says Delaware Online in “You've just inherited a million dollars. Now what?”
Baby Boomers, who are the biggest and wealthiest generation ever, will pass on almost $30 trillion in assets to their Generation X and millennial children in the next few decades, with just over 10% of that changing hands over the next decade. That will create a whole new class of millionaires.
Many are saying that the situation is tougher on the person receiving the money, than the one giving it away.
It is hard to tell a younger person to think long-term today. However, the best thing a “suddenly rich” person can do is to hire a financial advisor, trust and estates attorney and a CPA.
It’s best for children look around, until they find a financial advisor who matches their needs. Studies show that about 66% of children fire their parents' financial advisor when they inherit their wealth. Millennials and Gen Xers may feel more comfortable with a person closer to their own age with contemporary ideas.
Get comfortable with that person and their compensation. Make sure that you select a financial advisor who has your best interests at heart.
Children who inherit a large amount of money should pause and consider their short- and long-term goals. When you understand your goals, it’s easier to find an advisor who can execute that vision.
A financial advisor will monitor the inheritors’ financial goals and keep them on course. Sometimes those who receive a sudden windfall, don’t truly comprehend how much money they have. As a result, they burn through it like it was going out of style.
Inheritors shouldn’t run out and make major lifestyle changes right away. Flaunting new found wealth, like buying a Porsche or adding a swimming pool to your house, could make you a target for scammers.
Prepare for the cash influx by talking to your parents about the amount you will receive and how it will be handled. Parents may want to consider creating revocable trusts to protect kids who haven’t had any experience with significant assets to date. An estate planning attorney can help.
Reference: Delaware Online (June 23, 2017) “You've just inherited a million dollars. Now what?”