Most people with significant assets have read or heard about the “Great Wealth Transfer.” That’s the name commonly given to the estimated $124 trillion that Baby Boomers and those even older are projected to hand down to younger generations in the U.S. over the next couple of decades.
For those assets to reach their intended beneficiaries without unnecessary delays and other complications and expenses, however, it’s critical that those passing on their wealth give careful thought to their estate planning and have important conversations with their loved ones proactively.
Estate plans and family communication are lacking
While nearly every adult should have an estate plan in place – at minimum, a will – too many Americans don’t. One study found that just 57% of the population has a will.
This lack of planning isn’t limited to those with few assets to hand down. Another study determined that over two-thirds of parents 55 and over who have at least $500,000 in investable assets admit that they haven’t discussed inheritances with their children.
How real estate assets can be lost
Approximately $2.4 trillion of that Great Wealth Transfer is in real estate. However, realtors and other housing experts warn that billions of dollars of that won’t get to its intended beneficiaries – or they won’t be able to keep it due to inadequate estate planning.
Oftentimes, people leave homes and other properties to adult children and other relatives without giving enough thought to whether they can afford it. Especially here in California, property taxes and insurance premiums alone are beyond many people’s budgets. If there’s a mortgage or other lien on a property, the beneficiary may not be able to get out from under it. Just maintaining a large property or one in an exclusive area can be costly.
When people inherit property, they can’t afford to maintain or don’t want, they can become the victim of predatory investors. California’s Uniform Partition of Heirs Property Act offers some protection for those who inherit property or land from someone who died without a will (intestate) so that they get a share of the proceeds if it’s sold. However, if it isn’t properly designated as an inheritance, it could be sold for far less than it’s worth.
Finally, a not-insignificant amount of inherited wealth can be lost in legal disputes among families when estate plan documents aren’t clear or don’t exist. At a minimum, lack of clear, codified inheritances can extend and complicate the probate process.
By getting experienced estate planning guidance, drawing up a comprehensive estate plan, keeping it updated and communicating your goals and wishes to your loved ones, you can help your loved ones to avoid the unnecessary loss of the assets you’ve worked hard to build and maintain.
