The Great Wealth Transfer Has Begun. Is Your Family Ready?
Legacy planning means organizing how your assets are owned, titled, and transferred so your family can keep as much as reasonably possible and know what to do if something happens. A strong plan typically reviews estate documents, asset titling, beneficiary designations, taxes on retirement accounts, and who can manage your finances if you become incapacitated.
Years ago, a gentleman in his 70s came to see me.
Neither of us expected that our relationship would continue for more than a decade.
We talked about the stock market, his golf swing and, frequently, his children. On some days, they were the brightest and most talented people he knew.
On other days?
They were his future inheritance seekers.
But one thing never changed.
He spent a lifetime building his wealth, and he wanted to pass it to his children and grandchildren thoughtfully, without losing more than necessary to taxes, poor planning, or outdated paperwork.
I think about him often now because that same conversation is happening in families across America.
The Great Wealth Transfer is already underway
Cerulli Associates estimates that $124 trillion may transfer through 2048, including approximately $105 trillion to heirs and $18 trillion to charities.
But an inheritance's size tells us surprisingly little about what a family may ultimately keep.
A $500,000 traditional IRA isn't the same as $500,000 of appreciated stock.
A Roth IRA isn't the same as an HSA.
Company stock isn't the same as cash.
And life insurance can have very different tax characteristics from all of them.
What you own matters. How you own it matters. And who inherits it matters.
For families thinking about legacy planning, here are some of the areas I believe deserve attention.
1. Start with the estate documents
For many families, an estate-planning attorney may recommend a revocable living trust, accompanied by a pour-over will, powers of attorney and health care directives.
A living trust may provide instructions for managing and distributing assets and, when properly structured and funded, may help certain assets avoid probate.
But signing the trust isn't enough.
It needs to be funded appropriately.
That means reviewing whether assets intended to be controlled by the trust have actually been titled correctly.
A pour-over will can provide a backstop for certain assets left outside the trust, but those assets may still need to go through probate before reaching the trust, depending on applicable state law.
And an important distinction: a revocable living trust does not, by itself, make an inheritance tax-free.
Its purpose is generally about ownership, management and distribution rather than automatically eliminating taxes.
2. Check how every major asset is titled
Pull out your statements and ask:
Who legally owns this?
Review your home, brokerage accounts, bank accounts, rental properties, vacation property and business interests.
Then compare that ownership with your estate documents.
A carefully drafted trust can only accomplish so much if the assets intended for it were never properly titled.
This is where coordination matters. Your estate attorney, financial professional and tax professional should ideally be working from the same financial picture.
3. Review every beneficiary designation
IRAs, 401(k)s, 403(b)s, life insurance and annuities may transfer according to their beneficiary designations or contract terms rather than instructions in a will.
That makes an old beneficiary form surprisingly powerful.
Review your primary beneficiaries, contingent beneficiaries,, and percentages.
Then review them again after marriages, divorces, births, deaths and other significant family changes.
If you're considering naming a trust as beneficiary of a retirement account, involve your estate attorney and tax professional. The rules can be complex.
Never assume your will fixes an outdated beneficiary designation.
4. Understand the tax sitting inside traditional retirement accounts
A $1 million traditional IRA is not necessarily the same inheritance as $1 million in cash.
Traditional retirement accounts generally contain money on which income tax has been deferred.
When heirs eventually take taxable distributions, that tax obligation can follow the account.
Under current rules, many non-spouse beneficiaries generally must empty inherited retirement accounts within 10 years, with additional distribution requirements potentially applying in certain circumstances.
This can become particularly important when adult children inherit during their peak earning years.
So don't look only at your tax bracket.
Consider the potential tax circumstances of the people who may eventually inherit the account.
5. Model Roth conversions before you need them
A Roth conversion may allow a family to pay income tax on traditional retirement assets today in exchange for different future tax treatment.
That can potentially make sense when a parent's current tax rate is lower than the rate beneficiaries may face later.
But it isn't automatic.
Large conversions can increase current income, potentially affect Medicare income-related premium adjustments and interact with other tax items.
For retirees already taking RMDs, the required distribution generally must be satisfied first; the RMD itself cannot be converted.
This is where planning early can matter.
Instead of making one large conversion, a family may have several tax years in which partial conversions can be evaluated.
6. Be careful before gifting appreciated stock
This is one of the planning opportunities families frequently overlook.
Imagine stock purchased for $50,000 that is now worth $500,000.
Giving it away during life and leaving it to someone at death can produce very different tax results.
With a lifetime gift, the recipient may generally receive the donor's basis for purposes of determining gain.
Certain inherited appreciated assets, however, generally receive a basis adjustment to fair market value at death, subject to applicable rules and exceptions.
Before gifting appreciated stock, real estate or other property, ask:
What is the cost basis? What is the unrealized gain? What happens if we gift it now? What might happen if it is inherited instead?
Sometimes a generous decision made without reviewing basis can create a tax consequence no one anticipated.
7. Treat company stock, RSUs and stock options separately
Executives and longtime employees can accumulate substantial wealth through company stock, restricted stock units, stock options, employee stock purchase plans and deferred compensation.
These assets deserve their own planning discussion.
There may be concentration risk, vesting schedules, option expiration dates, cost-basis issues, and different tax consequences depending on the type of equity compensation.
Before making a major decision, gather the grant documents, vesting schedules, option information and cost-basis records.
Then ask a deceptively simple question:
How much of our family's financial life now depends on one company?
That can be both an investment question and an estate-planning question.
8. Consider lifetime gifting without compromising your own retirement
Giving while you're alive can allow you to see your money help someone you love.
But gifting should begin with your own financial independence.
Before making a substantial gift, consider:
Can I afford this if I live longer than expected? What if markets decline? What if health or long-term care costs rise? Does one child need help now while another does not?
Federal gift-tax rules provide opportunities for lifetime gifting, but the amount you're permitted to give shouldn't be the only reason for giving it.
Your own financial needs remain part of the equation.
9. Review life insurance as part of the estate plan
Life insurance may provide liquidity for heirs, support a surviving spouse, help address estate expenses or create an inheritance.
Death benefits paid because of the insured's death are generally excluded from the beneficiary's gross income for federal income-tax purposes, although exceptions apply.
But income-tax-free does not necessarily mean estate-tax-free.
Policy ownership, beneficiary designations and other factors can matter.
Review the owner, insured, beneficiary, death benefit, premium, policy type and purpose.
Most importantly, ask why the policy exists and whether it continues to fit the family's broader financial and estate plan.
10. Don't automatically preserve the HSA for the children
HSAs can offer valuable tax treatment during life when used appropriately for qualified medical expenses.
At death, beneficiary treatment differs.
A surviving spouse generally receives different treatment than a non-spouse beneficiary. For an adult child or other non-spouse beneficiary, the account generally ceases to be an HSA and may become taxable under applicable rules.
So an HSA shouldn't automatically be treated as the account you want to preserve longest for the next generation.
11. Look closely at real estate
A home, rental property or vacation property can carry substantial appreciation.
It can also carry substantial family complexity.
Review ownership, cost basis, mortgages, depreciation where applicable and how the property is supposed to transfer.
And ask the practical questions.
If three children inherit the vacation home, who pays the expenses?
Who gets to use it?
What if one wants the property and the other two want cash?
Sometimes the most valuable estate planning isn't about taxes.
It's preventing an asset from becoming a family dispute.
12. Coordinate charitable giving with the estate plan
If charitable giving is already important to your family, consider which assets you use to accomplish it.
Depending on individual circumstances, appreciated securities, qualified charitable distributions from eligible IRAs, charitable beneficiary designations and other approaches may warrant discussion.
Different assets can have different tax characteristics when left to an individual versus a qualifying charity.
The charitable intention comes first.
Then consider how to implement it thoughtfully.
13. Don't overlook state taxes
Federal estate tax gets most of the attention, but state rules can be very different.
Depending on where you live or own property, state estate or inheritance taxes may apply even when federal estate tax does not.
This becomes particularly important for families who retire in one state while maintaining property in another.
If you've moved since your estate plan was drafted, that alone can be a reason to discuss whether the plan should be reviewed.
14. Plan for incapacity, not only death
This may be one of the most overlooked parts of estate planning.
We spend so much time asking:
“Who gets my money when I die?”
But there is another question that can become important much sooner:
“Who can manage my financial life if I'm alive but unable to do it myself?”
I've seen how quickly that distinction can become real.
We were working with a family when one spouse became seriously ill and was hospitalized. An account was held in that spouse's individual name. The other spouse did not automatically have access simply because they were married.
The account owner was still alive, but unable to make financial decisions personally.
Meanwhile, bills still had to be paid.
Financial decisions still had to be made.
The spouse needed access at precisely the moment the family had far more important things to worry about.
Then the account owner passed away.
Only after death did the provisions governing transfer at death become relevant.
It was a difficult reminder:
Planning for who receives an account after death and planning for who can manage it during incapacity are two different things.
This is particularly important when looking at a transfer-on-death, or TOD, designation.
A TOD designation can be useful. It generally tells the financial institution who should receive the account when the owner dies.
But the key words are:
When the owner dies.
Being named as a TOD beneficiary generally does not give that person authority to access or manage the account while the owner is still alive but incapacitated.
So while a TOD may be better than having no transfer instructions at all in some circumstances, it may not be enough to accomplish everything a family assumes it does.
Compare three different planning tools:
TOD designation: Generally addresses who receives an account after the owner's death.
Properly titled trust account: The trust owns the asset, and an authorized successor trustee may potentially manage it according to the trust's terms if the applicable conditions are satisfied.
Financial power of attorney: May authorize another person to handle specified financial matters during the account owner's lifetime, subject to the document, institution and applicable law.
They solve different problems.
And simply adding a spouse or adult child as a joint owner isn't necessarily the answer. Joint ownership can introduce its own legal, tax, creditor and estate-planning consequences.
This is why I encourage families to review each major bank and investment account and ask two separate questions:
Who receives this when I die?
Who can manage this if I'm alive but cannot?
Then discuss with your estate-planning attorney whether the account should be held in your trust, remain individually owned with appropriate beneficiary instructions, or be structured another way.
Review your financial powers of attorney and successor-trustee provisions as well.
And consider contacting your bank and brokerage firm to understand what documentation they would actually require during incapacity.
Because an estate plan shouldn't only work after you're gone.
It should also consider the possibility that someone you trust may need to step in while you're still here.
15. Create a financial instruction sheet for your family
Your family doesn't necessarily need to know your entire net worth today.
But someone should know where to look.
Create a secure record showing your financial professional, CPA, estate attorney, trust and will location, successor trustee and executor, insurance policies, real estate, retirement accounts, business interests, company equity, debts, digital assets and safe-deposit box.
Don't put sensitive passwords into documents that could become public. Work with your attorney on an appropriate method for maintaining digital-access instructions.
When someone dies or becomes incapacitated, the family is already carrying enough.
Finding the financial life shouldn't become another burden.
16. Have the family meeting
You can have excellent documents and still leave your children completely unprepared.
At some point, have the conversation.
It doesn't need to begin with dollar amounts.
It can begin with:
“We've done some planning. If something happens to us, here are the people you should call.”
Explain who the trustee or executor will be.
Tell them where important documents are located.
Discuss significant property or business interests.
And, when appropriate, explain the thinking behind the plan.
Children don't necessarily need every number.
But they should understand the map.
Why planning early matters
The earlier families begin, the more decisions they may have time to evaluate.
More years to consider Roth conversions.
More time to review appreciated assets before gifting them.
More time to address concentrated company stock.
More time to evaluate insurance.
More time to correct beneficiary designations and asset titling.
More time to update estate documents and incapacity planning.
And more time to talk with children while everyone can participate in the conversation.
Estate planning done during a crisis feels very different from planning done over a kitchen table on an ordinary Tuesday.
The ordinary Tuesday is preferable.
Bring the pieces to Sun Group Wealth Partners
At Sun Group Wealth Partners, we believe legacy planning begins with understanding the entire financial picture.
For clients, that can mean reviewing retirement and investment accounts, beneficiary information, account titling, appreciated assets, company stock and equity compensation, insurance and the way these pieces fit within the broader financial plan.
Your estate-planning attorney has an important role in drafting and interpreting legal documents.
Your CPA or tax professional has an important role in tax analysis.
And your financial team can help organize the assets, identify financial questions worth addressing and coordinate the conversation.
If you haven't reviewed your legacy plan recently, consider bringing the following to your next Sun Group Wealth Partners meeting:
Living trust, pour-over will, powers of attorney and recent estate documents
Current bank and brokerage account titling
TOD/POD instructions and beneficiary designations
IRA, 401(k), 403(b) and Roth IRA statements
Brokerage statements and cost-basis information
Company stock, RSU and stock-option documents
Real estate and ownership information
Life insurance and annuity statements
Business ownership or succession documents
Recent tax return
Contact information for your CPA and estate-planning attorney
We'll start with what you have.
Then we can identify the questions that may need to be addressed with the rest of your professional team.
What my client taught me
My old friend wanted to keep as much of what he'd built in his family as reasonably possible.
But after more than a decade of conversations, I realized the taxes weren't really the point.
His children were.
His grandchildren were.
He wanted a lifetime of work to mean something after he was gone.
That's the part of the Great Wealth Transfer that can't be measured in trillions.
So perhaps the most useful question isn't:
“How do I leave an inheritance without taxes?”
There may be no universal way to do that.
A better question is:
“How thoughtfully can I pass forward what I've built?”
Start early.
Know what you own.
Know how it's titled.
Know who inherits it.
Know who can step in if you can't manage it yourself.
And make sure the people you love know who to call.
This material is provided for general educational purposes and is not intended as individualized investment, tax, legal, insurance or estate-planning advice. Estate-planning and tax laws are complex, vary by jurisdiction and may change. Sun Group Wealth Partners and LPL Financial do not provide legal or tax advice. Before implementing gifting, Roth conversion, beneficiary, insurance, trust, TOD/POD, asset-titling or other estate-planning strategies, consider consulting the appropriate financial, tax, insurance and legal professionals.
Winnie Sun is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Sun Group Wealth Partners, a Registered Investment Advisor and separate entity from LPL Financial.
The two-question test in Section 14 is the part I’d especially preserve: Who receives this when I die? Who can manage it if I’m alive but cannot? It makes the TOD-versus-incapacity distinction understandable without drifting into individualized legal advice.
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