Wealth Transfer Strategies: Family Wealth Planning for Future Generations
Wealth Transfer Strategies: Family Wealth Planning for Future Generations
The numbers in your accounts might seem like enough to bolster your family’s future, but without the right planning they could fall short when it matters most. Sometimes we have to ask ourselves the uncomfortable questions: How would it feel if your family’s financial security was compromised? Are you confident that what you’ve worked so hard for will continue to support them in the years to come?
If you’re interested in passing along more than memories to your loved ones, it’s time to start planning. Extending wealth across generations takes education, careful organization, and stewardship.
The adage goes, “Shirtsleeves to shirtsleeves in three generations.” Unfortunately, the second generation tends to be the one that drops the ball before it even makes it to the third. 70% of children from wealthy families lose their inheritance before it even makes it to the third generation. That’s why it’s important to take the additional steps that might lead to better decision-making and safeguards for your heirs.
What Is a Wealth Transfer Strategy?
The Great Wealth Transfer, which refers to the trillions of dollars shifting from baby boomers to their heirs, is well underway. As such, estate planning and investment strategies are encouraged for younger Americans who are falling into the fold of generational wealth.
But wealth transfer isn’t just about passing assets—it’s about securing the family tree. A fortified strategy could reduce taxes, maintain family assets, and control how and when to distribute assets. Wealth transfer strategies cultivate a personalized plan for moving assets from generation to generation.
While a common misconception is that wealth transfer begins after death, there are plenty of tactics to insulate wealth during one’s lifetime. Especially because transferring ownership can require extensive time and planning, getting ahead on wealth transfer strategies might serve you well.
Here’s how to start.
Purchasing Investments for Generational Wealth Planning
Your legacy could last longer and pack a greater punch if invested in high-growth assets. 68% of boomers say they want to provide financial support to their dependents to purchase a home. As of 2024, U.S. home prices have experienced an average annual appreciation rate of approximately 4.27% since 1967.
But in comparison, a more impressive investment might be an index fund following the Nasdaq-100, which has delivered an average annual return of approximately 13.2% over the last 30 years (as of 12/2023). This growth, driven by tech-heavy, high-performing companies, is more than three times the annual appreciation rate of U.S. home prices since the late 60s. It’s important to understand these numbers could reflect the difference in risk and volatility between assets—an important measurement to consider when selecting investment gifts, as well as macro-economic and other factors in the economy.
Unlike purchasing a home, which may come with ongoing maintenance or renovation challenges, a mutual fund like NASDX offers simplicity, professional management, and historical growth potential.
NASDX is a mutual fund recognized for excellence. The fund has earned a spot on Forbes Advisor’s “10 Best Mutual Funds for 2024” list, the title of “Best Index Fund for 2024” by Time.com, and features in Kiplinger’s Mutual Fund Guide for 2024 among the top ten large-cap mutual funds.
Its historical performance may make NASDX a good choice when pondering wealth transfer strategies, particularly for those with beneficiaries who prioritize liquidity and long-term returns over physical assets. Of course, past performance of any investment is not a guarantee of future performance, and you could lose money on such an investment.
Family Wealth Planning Through Gifts
Gifting is one of the simplest ways to reduce your taxable estate while helping loved ones today.
Annual Gifting
In 2024, you can gift up to $18,000 per recipient annually without triggering gift taxes. This amount increases to $19,000 in 2025. Married couples can combine their gifts, doubling these limits to $36,000 in 2024 and $38,000 in 2025 per recipient.
Upstream gifting is another family wealth planning tool growing in popularity, and it could help reverse the flow of wealth transfer. In simple terms, gifting a mutual fund to your parents or grandparents could reset its cost basis when they pass away. This means your heirs might pay less in capital gains tax when they inherit and sell the shares.
Please note that tax-efficient family wealth planning can be complex, and these general ideas are not meant to be tax advice. You should seek advice from a specialist in these areas.
Pay the Man
Instead of treating your heirs as intermediaries, go to the institution. For example, you can pay medical expenses and tuition directly to avoid gift taxes entirely.
You might also consider a 529 Plan for additional college gifting strategies.
A Limited-Time Opportunity
What once went unnoticed in the Tax Cuts and Jobs Act (TCJA) of 2017 is the landmark tax exemption that more than doubled what families can pass on to their beneficiaries. In 2025, a single taxpayer can take advantage of a federal estate and lifetime gift tax exemption of $13.99 million. The IRS caps couples from joint gifting more than double that amount. If Congress doesn’t act, this amount will retreat in 2026.
Gifting Strategies for Business Owners
A direct gift of the business in the form of transferring ownership can be done in pieces or all at once. However, it still uses the TCJA or annual gifting to remain outside of the owner’s taxable estate.
Raise Good Stewards Committed to Longevity
Conventional recommendations like those discussed above might be enough to protect your wealth, but the way your family treats a generational wealth transfer determines whether the fruits of your investment will have the real capability to last and continue to grow.
Encouraging your heirs to view their inheritance as a gift AND a responsibility can foster a lasting legacy. By instilling a sense of stewardship and accountability, you can inspire future generations to slow the “burn rate” and maybe even pay your good deed forward.
“It takes money to make money,” as the saying goes. With the right approach, your hard-earned savings just might grow into a powerful tool for securing your family’s future and building lasting prosperity.
Important Information
Investors should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about the fund. To obtain a prospectus, visit www.sheltonfunds.com or call (800) 955-9988. A prospectus should be read carefully before investing.
An investment in the Fund involves risk, including possible loss of principal. Fund information is not intended to represent future portfolio composition. Portfolio holdings are subject to change and should not be considered a recommendation to buy individual securities.
The Fund invests in the largest non-financial companies that are traded on the Nasdaq Stock Market. They are currently concentrated in the technology sector which has been among the volatile sectors of the U.S. stock market. During a declining stock market, this fund would lose money. It would potentially lose more money than other large cap funds.
Nasdaq®, Nasdaq-100® and Nasdaq-100 Index® are trade or service marks of The Nasdaq Stock Market, Inc. which with its affiliates are the “Corporations”) and are licensed for use by the Fund. The Fund has not been passed on by the Corporations as to their legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Fund. Diversification does not assure a profit or protect against lost in a declining market.
It is not possible for individuals to invest directly in an index. Performance figures for an index do not reflect deductions for sales charges, commissions, expenses or taxes.
Shelton Funds are distributed by RFS Partners, a member of FINRA and affiliate of Shelton Capital Management.
Investors should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about the fund. To obtain a prospectus, visit www.sheltonfunds.com or call (800) 955-9988. A prospectus should be read carefully before investing.
INVESTMENTS ARE NOT FDIC INSURED OR BANK GUARANTEED AND MAY LOSE VALUE.
The reader should not assume that investment decisions identified and discussed were or will be profitable. Specific investment advice references provided herein are for illustrative purposes only and are not necessarily representative of investments that will be made in the future.
