A massive transfer of wealth from boomers

I just returned from my annual conference in sunny and hot (but it’s a dry heat haha) San Diego, California hosted by my broker dealer LPL Financial, LLC. We had meetings from 8 a.m. until 5 p.m. for two days, and, yes, I attended all of them! We heard from experts in a variety of fields and from some of our fellow advisors. I was able to visit the San Diego Zoo one evening and attend a Lionel Ritchie concert on the other evening. Lionel is 75 years old, and he put on a vibrant show highlighting his songs from the Commodores and his solo career. My first concert was a Lionel Ritchie concert in 1984 in Jackson, Mississippi. Surprisingly, even though I was front row in San Diego, he did not seem to recognize me! 

One of the major themes we have been hearing about for a few years is the massive wealth transfer set to occur as the baby boomers (like Lionel Ritchie, born between 1946 and 1964 and current ages of between 60 and 78) pass their hard-earned savings, investments, real estate, insurance, and business holdings to their heirs. I want to break this down to a localized and personal level. There are a few upcoming issues that need to be addressed sooner rather than later.

First is the cost of long-term care. This cost can quickly deplete accounts intended for other purposes or people, It can even ruin an average sized estate. The Florida Healthcare Association reported on Aug. 16 that the median annual cost for assisted living is $48,000 and for a private room in a nursing home is $100,000. When you factor in inflation, the cost will be much more by the time you may need it. There are ways to insure against this cost. Insurance companies are getting very selective, but premiums are currently affordable for many people. Seek to remedy this issue before your health changes and while you can afford it (as painful as it may be).

Second is the sunset of the estate and gift tax exclusion. Starting in 2026 (a little over a year from now), estates over $7 million in value will be subject to estate taxes of roughly 40%. Proper planning, gifting, asset titling, and estate planning may help reduce or eliminate this cost. 

Third is the valuation and preparation for sale of privately-held businesses. A Dealware M&A Market Survey (2022) revealed that 51% of businesses are owned by baby boomers and that the average boomer thinks about the next phases of life at age 63. Their businesses may be up for sale in the next 10 years as they look for ways to exit their ownership responsibilities and enjoy the financial fruits of their labor. Smart business owners start considering a sale three to five years prior to selling so that they can clean up their balance sheets, accurately report cash flows, and recruit/train people who can carry the torch for the new owners without having to make sacrifices in the sales price because no one knows how to run the business or maintain relationships with existing clients and customers.

A certified financial planner practitioner is a great person to serve as the quarterback on a team that includes legal guidance, tax advice, and business sale preparation and disposition. This massive transfer of wealth can be good for you and your family if you can maximize the value you obtain and retain, while minimizing the risk, cost, and taxation of the transfer.

Gulf County resident Walter L. Woodrick is a certified financial planner practitioner and author of two books. His website is WoodrickFinancial.com, and his text number is 850.724.1369. Securities and advisory services are offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. #616608-1