Key Takeaways
- A historic $124 trillion generational wealth transfer is taking place, highlighting the need for proactive financial legacy planning.
- Documenting your specific goals and values is foundational to creating a lasting, multigenerational legacy.
- Establishing a comprehensive financial plan helps to ensure your legacy strategies support your wealth transfer and long-term family wishes.
The United States is currently undergoing a massive generational wealth transfer. By the late 2040s, an estimated $124 trillion in assets is expected to pass from older generations to younger generations. This massive transfer is prompting discussions around estate planning, wealth preservation and the type of financial legacy individuals wish to leave behind.
If you’re hoping to leave a financial legacy for your loved ones, it’s important to have a plan in place. The following steps can help you leave your mark in supporting future generations of family members.
Step 1 – Articulate Your Goals and Values
The first step in leaving a lasting multigenerational legacy is to take time to document your specific goals and articulate the values you’d like to hand down to future generations. Your goals and values are the guardrails that keep you from letting the small things derail you from your larger focus. Considering your responses to the following questions can be a great place to start.
- What core principles guide my life?
- What are my most important life ambitions?
- How do I hope to be remembered?
- What characteristics and values do I hope to instill in my children and grandchildren?
- What unique family circumstances exist that may require extra planning?
Once you’ve identified your specific values, consider how you can use your finances to support those values. For example:
- If you value higher education, you may decide to establish a plan to pay for your loved ones’ college expenses.
- If giving back to charitable causes is an important priority, you may decide to implement a donor-advised fund or family foundation to encourage a multigenerational approach to giving back.
- If you hope to encourage an entrepreneurial mindset in future generations, you could establish a plan to provide grants for your loved ones’ new ventures contingent on a well-developed business plan.
- If your goals include teaching your children and grandchildren to be wise stewards of the family’s wealth, you may consider how you can start gradually handing over financial responsibility while you’re still around to provide guidance and oversight.
Your wealth manager and estate planning attorney can help document your priorities and implement strategies to help you achieve these objectives.
Step 2 – Establish a Comprehensive Financial Plan
One of the best ways to take control of your financial legacy is by establishing a comprehensive financial plan to guide your decision-making. Your plan should incorporate all the various aspects of your financial life, including investments, retirement planning, savings strategies, strategic tax planning and, of course, estate planning.
This comprehensive plan serves as a blueprint to help guide all aspects of your financial life, and it can help you gain an understanding of your current financial situation in relation to the legacy goals you’re trying to achieve. This knowledge can be used to inform your financial decisions throughout life, which all have an impact on your ability to fulfill your legacy goals.
You may be wondering why this step involves creating a financial plan rather than an estate plan, specifically. It’s because at Creative Planning, we believe your estate plan should be viewed as one component of your overall financial plan. The benefit of this approach is that it helps ensure your legacy planning strategies are aligned with the other aspects of your financial life. Having a comprehensive financial plan in place to guide all of your decisions helps you gain a bird’s-eye view of your entire financial picture so that you can implement complementary strategies that work together to improve efficiencies and give you a better chance of achieving your long-term financial goals.
As part of the financial planning process, your wealth manager and estate planning attorney will help you incorporate specific estate planning strategies to help you achieve your legacy goals. These may include any combination of the following:
- Durable power of attorney
- Healthcare power of attorney
- Living will
- Revocable living trust
- Irrevocable trust
- Life insurance trust
- Charitable trust
- Private family foundation
- Testamentary trust
- Family limited partnership (FLP)
- Special needs trust (SNT)
Step 3 – Protect Yourself Against Risk
Keep in mind that all the savings and investments in the world can’t support your lifestyle if you lose those assets to a lawsuit, accident, injury, natural disaster, etc. That’s why it’s important to take steps to protect the wealth you’ve worked so hard to build.
Your wealth manager will work with you to conduct a thorough risk analysis across your entire financial life to identify any potential gaps in your existing risk management strategies. Based on that analysis, you may need to add additional risk management strategies, which could include any combination of the following:
- Life insurance
- Homeowners/renters insurance
- Disability insurance
- Auto insurance
- Malpractice insurance
- Professional liability insurance
Step 4 – Have a Family Discussion
Communicating your legacy wishes to your loved ones is an effective way to make sure everyone is on the same page, which can help prevent conflicts and resentment after your passing. However, this can also be the most difficult step in the legacy planning process. Not only does the conversation require everyone involved to consider the reality of your eventual death but it can also bring up sensitive topics, such as who will take over the family business or who will inherit what. The following tips can help you navigate this difficult conversation.
Choose the right time and place
When it comes to having this difficult conversation, time and place can make a big difference in your loved ones’ mindsets. Consider scheduling a dedicated family meeting or one-on-one time with each family member. Notify your loved ones of this conversation in advance to give them time to mentally prepare. Then, choose a calm and private setting in which to have the conversation.
Share your family story
Start the meeting by sharing a little bit about your family’s history and how your family got to this point. If later generations have respect for, and understand, the way in which wealth was built, there’s a much greater chance that they’ll be conscientious and on board with the process. This is a great time to reiterate the family’s core values and long-term vision as well.
Be prepared
Be ready to provide your family with information about your legacy plan, including details about your will, trust, powers of attorney, healthcare directives and other important documents. Take time to document any specific instructions you’d like your loved ones to carry out on your behalf.
However, don’t feel the need to share every detail during this conversation. Remember that specific asset values can’t be unseen, and this information can lead to unintended consequences for those unprepared to handle wealth (i.e., a loss of motivation to work or pursue goals). You know your family best, so share the information you believe will be most helpful in helping them prepare for the future.
Emphasize the importance of family harmony
Remind your loved ones that one of the main goals of legacy planning is to promote family harmony and avoid conflicts among loved ones following your death. Also communicate that legacy planning isn’t just about assets and material possessions — it’s about preserving your relationships and family values. Encourage your loved ones to work together in a cooperative and respectful manner, knowing that you carefully considered your wishes and made plans to help ensure everyone will be taken care of.
Ask for feedback and concerns
One of the benefits of talking with your family members about your legacy plans is that it allows them an opportunity to communicate their feelings and concerns. A loved one may bring up an issue you had never considered that could prompt you to make a change to your planning strategies. Be open and patient with any concerns your family members have. Getting everyone on the same page is essential for the long-term success of your plan. It’s better to have these conversations while you can still act on your loved ones’ feedback rather than making a decision that could lead to problems or conflict when you’re no longer around to make a change.
Step 5 – Consider Lifetime Giving
The most valuable legacy you’ll leave isn’t a financial one; it’s an emotional one. Prioritizing time with your loved ones allows your family members to make lasting memories together that they’ll cherish for a lifetime. This may involve taking an annual family trip together, sharing holiday traditions or finding ways to be involved in each other’s daily lives. Whatever you enjoy doing together, prioritizing experiences over material possessions can help you establish the most important, longest lasting legacy of all.
Remember those goals and values you articulated in Step 1, and be sure to let them guide both your life decisions and your financial decisions. One way to do so is by providing financial support to your loved ones throughout your lifetime, rather than through your estate.
A valuable benefit of giving throughout your lifetime is that you have an opportunity to see the positive impact your gifts can have on the lives of those who matter most to you. Second to that, a financial benefit is that giving throughout your lifetime can reduce the value of your taxable estate, saving your loved ones from paying estate taxes on assets that exceed the lifetime gift tax exclusion ($13.99 million in 2025, increasing to $15 million in 2026).
Maximize your gifts
In both 2025 and 2026, the IRS allows individuals to give up to $19,000 per year per recipient without triggering gift tax reporting requirements. Married couples can each give up to $19,000 per recipient, for a total annual gift of $38,000. If your child is married and you want to increase the total gift, you could each give another gift of $19,000 to your child’s spouse. There’s no limit on the number of gift recipients, so you’re free to support multiple family members each year.
Contribute to education expenses
If your legacy goals include encouraging your heirs to pursue higher education, the following strategies can help maximize your impact.
Direct payment to an educational institution
The IRS allows individuals to make unlimited payments directly to education institutions without triggering the gift tax. The key word here is “directly,” as the payment must be issued directly to the school. Any money given to an individual doesn’t qualify, even if the recipient uses it to pay for educational expenses.
It’s also important to be aware that any money paid directly to an educational institution by a parent can reduce a student’s eligibility for need-based aid; however, payments by other relatives or unrelated parties don’t impact eligibility.
Contribution to a college savings account
Another option for supporting a loved one’s education goals is to contribute directly to a 529 college savings plan. The annual 529 contribution limit is the same as the annual per-recipient gift tax exclusion amount of $19,000 per individual donor, or $38,000 per married couple. However, the IRS allows taxpayers to frontload up to five years’ worth of contributions in a single year. That means you can give up to $95,000 per year, per recipient. This amount doubles to $190,000 if you and your spouse both wish to support a loved one’s educational aspirations. Keep in mind that the eligible uses have greatly expanded over the last decade, including $10,000 a year toward K-12 education, vocational and trade schools, as well as the ability to move up to $35,000 into a Roth account for that child if there are excess funds when they’ve completed their higher education.
Give appreciated assets
Another tax-efficient gifting strategy is to make an in-kind gift of appreciated assets, such as stocks. The benefit of doing so is that it saves you from paying capital gains tax on the future sale of those assets. If you give appreciated assets to someone in a lower income tax bracket, such as your children or retired parents, they could potentially sell the stock with no capital gains tax liabilities — or pay capital gains tax at a lower rate, depending on their tax bracket.
A common mistake is gifting appreciated assets at the end of an individual’s lifetime, rather than allowing them to transfer as part of an inheritance. Assets that pass via inheritance are eligible for a step-up in cost basis to their fair market value at the time of the original holder’s death, while assets gifted during one’s lifetime aren’t. If you plan on giving appreciated assets, be sure to work with your wealth manager to determine the right timing of the transfer.
