Home Latest Stories Ocean City Financial Group Breaks Down “The Great Wealth Transfer”

Ocean City Financial Group Breaks Down “The Great Wealth Transfer”

Ocean City Financial Group Planners Jodie Booth and Mark Reimet offer the best ways to manage assets.

By Maddy Vitale

There is a financial phenomenon materializing as aging baby boomers are beginning to transfer their assets to the next generation.

It is estimated that over the next 20 to 25 years, approximately $30 trillion will be passed on to the X-generation and millennials.

This enormous transfer of wealth is being coined “The Great Wealth Transfer,” Ocean City Financial Group Financial Planner Mark Reimet explained in a recent interview.

How great? “Baby boomers currently account for 70 percent of the disposable income in the country, so the transfer of this large amount of wealth to the next generation is poised to have major effects on our economy.” Reimet said.

Ocean City Financial Group Financial Planner Jodie Booth said the change could affect just about everyone. “Even if you don’t have a significant amount of personal wealth, it’s important to plan for the transfer of your assets.”

There are three ways assets transfer:

  1. By Will
  2. By Contract (where beneficiary designations are properly assigned)
  3. By Operation of Law – typically “intestate” transfers where a person dies without a will. State laws will dictate how and where assets transfer.

Reimet cautioned about the last option and said people must prepare and determine where their assets should go.

“People often ask me when should I address these issues?  The answer is always now,” he said. “You can save your family a lot of time and money by consulting professionals like a financial planner and tax attorney in preparation for when that time comes.”

Financial Planner Mark Reimet says when managing money, you really need to look to the experts for advice.

One example Reimet used in the interview was a story of an 80-year-old who purchased an investment property in 1971 for $75,000. That same property is worth $1.2 million today.

The owner had intended to sell it because he had tired of the work maintaining and running it. But a sale would mean capital gains taxes on the large amount of growth. Reimet suggested hiring a property manager to handle the work involved, then passing the real estate onto the children at death.  This will allow the property to receive a “step up in basis” at the time of death thus saving the children hundreds of thousands of dollars of capital gains taxes.  This is one example of how consulting a professional on a planning strategy can save families large tax dollars.

What else can baby boomers do now to prepare?

  1. Gift Money: If you gift money while still living, you could potentially lower the estate tax implications when transferring to the next generation. A single person can gift up to $15,000 a year (married couple can gift $30,000) to as many people as they want. The growth of the assets will now occur in the children’s or grandchildren’s estate.
  2. Pay College Tuition: You could consider paying a child or grandchild’s college tuition. “This is a great way for grandparents to transfer money to the next generation with no limit or restrictions, so long as it is paid directly to the school,” he said.
  3. Consider Long-Term Care Insurance: Baby boomers and their families should investigate long-term care and how they are going to pay for it. “One of the concerns is that paying for nursing homes could rapidly erode the estate,” Reimet said. “I personally want my money to go to my kids, not to a nursing home”. There are many new long-term care insurance options that can be coupled with life-insurance plans. “These combination plans are very comprehensive and can take care of two big needs for the price of one.”

The most important piece of advice both Reimet and Booth offered was to get started and to be open with your family about your plans for transferring wealth.

“Every family is different, but the advice I would give is to have open communication and to discuss as much as you can in advance,” Booth said. “You don’t have to be specific in your numbers, but have a plan in place and prepare your loved ones for The Great Wealth Transfer.”

Ocean City Financial Group is located at 801 Asbury Ave. in Ocean City. For more information call (609) 814-1100, visit www.oceancityfinancialgroup.com and also like them on Facebook.