Baby Boomer Wealth Transfer
The Baby Boomers will account for an unprecedented transfer of wealth.
Baby Boomers is those born after the second world-war, specifically between 1946 and 1964. Many studies have identified this time frame, as the greatest boost to the world population, also the group that accumulated the greatest wealth.
On January 1st of this year, those born on January 1st, 1946 turned 65,and those born in 1961 turned 50. Typically this age group marks the mind-shift from wealth creation and accumulation, to preservation and transfer to the next generation.
Considering that this section constitutes the wealthiest segment of the global population, this means an unprecedented transfer of wealth to the next generation.
A study by the Center for Retirement at Boston College indicated that the Boomers, apart from their own generated wealth, will also be receiving around $7.6 trillion as inheritance during their life time. Research amongst affluent baby-boomers in the US revealed asset protection and wealth transfer to family members, as the financial issue of most concern.
Wealth encompasses more than money, stocks, bonds and other financial products: Half of the world’s wealth consists of nonfinancial assets such as real-estate and privately owned businesses. The anticipation is that a great deal of this wealth transfer will go to family members and charity.
Especially Baby-boomers with investments in the USA should make arrangements because, if you have investments in the US, and you are not a citizen or resident of the US:
-US Estate Tax, (currently @ 55% would apply to all your US Holdings. Generally, only your first $60,000 is exempt.
So, in fact the descendants of those who do not plan could inherit far less than they ever thought!
Estate Planning is the process by which one arranges the transfer of his estate to the next generation. By applying Estate Planning, you will decide, who will get what part of the family patrimony and under what conditions.
Various tools are available that can be applied and used for Estate Planning. Tools typically considered by professionals are Trusts and Private Foundations, whereby the Private Foundation allows for a greater degree of control to be retained during your life time.
The Private Foundation can be described as a settlement of money or other assets for the (continuing) support or attainment of a purpose (objective) described in the articles of incorporation by which the foundation is created and internally organized also known as the Foundation Charter.
An designated group known as the Foundation Council is entrusted to pursuit the objects of the Foundation. The person who creates the settlement, is known as the Founder and those who will benefit from the settlement (traditionally the founder and members of his family) is known as the Beneficiaries.
Typically the Private Foundations are used for:
To own family businesses and avoid inheritance taxes, at transfer to the next generation.
To avoid US Estate Taxes.
To guarantee payments and other asset allocation to family members, for their
subsistence, education and other living expenses.
To avoid lengthy and costly probate procedures.
To manage and make distribution to scientific, humanitarian, religious or charitable
To protect weak and disadvantaged family members.
To organize and administer funds, for employees benefit.
As a substitute for a will, thus avoiding complicated inheritance and costly probate
As a mechanism to protect investments such as, time deposit accounts, stocks, bonds or
As a device to hold and own real estate or valuable art work.
As a mechanism to protect against political risk.
As a mechanism to conserve and protect assets against eventual future creditors.
Every year, too manyfamilies go through unnecessary nightmares because, the patriat kept kept postponing arranging his estate planning affairs, until too late !
If you are a baby boomer, perhaps it is time to contact your advisor.
For more information about this or other structuring possibilities:
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