Financial planning strategies affect multiple generations more often than families realize. College funding, retirement, and tax efficiency can involve children and future heirs.

Here are some ideas for conversations that support intergenerational planning and may encourage the whole family to participate.

College funding

  • Parents and grandparents may already be helping to support higher education for the next generation by funding a 529 plan. They may be interested in accelerating that gifting. Rules unique to 529 plans allow parents and grandparents to make five years’ worth of contributions in one tax-free gift. In certain cases, contributors can remove these assets from their taxable estate and retain control of the assets.
  • Another strategy involving 529 plans allows retired investors to direct required minimum distributions from retirement accounts to fund plans for grandchildren.

Retirement

  • Conduct annual beneficiary reviews on all retirement accounts, and insurance and annuity contracts.
  • Explore the advantages of a Stretch IRA strategy, which could provide for the extension of tax-deferred savings to future generations.
  • Offer a retirement “check-up” for the next generation of the family.

Taxes

  • Identify opportunities to shift income from a higher tax bracket to a family member with a lower tax liability.
  • Take advantage of installment sales to transfer assets to family members and spread out the tax liability.
  • Explain tax credits associated with the Affordable Care Act, which may help adult children offset the cost of health insurance.

Estate planning and risk management

  • Highlight the importance of having proper documents (wills, powers of attorney, health care directives, etc.) in place.
  • Identify and meet with the child or other family member who will take the lead role if something does happen within the family.
  • Consider different gifting strategies to transfer wealth to future generations, such as the use of Dynasty Trusts, Family Limited Partnerships, or Charitable Trusts.

Exploring these topics may uncover planning opportunities that can naturally include the next generation. Financial professionals can position their business to provide planning services for the extended family and serve as a resource for other experts who may help heirs in the future.


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