2025-04-01 by Sue Hunt
The Great Wealth Transfer
Over the next 20 years, an estimated $84 trillion in assets is expected to change hands from older Americans to younger Americans in what financial experts are calling the "Great Wealth Transfer."[1]
Although Americans are living longer and spending more time—and money—in retirement, many parents intend to leave an inheritance to their children. The exact amount can vary greatly depending on individual circumstances and wealth levels, but even a small inheritance can be meaningful and help set a child up for long-term financial success, provided they are ready to handle it, which may not be the case.
Most families fail to discuss wealth transfers to ensure that younger generations are prepared for an inheritance. Parents need to decide how they want to pass their assets (accounts and property) to their children and other beneficiaries so they can plan the transfer in a way that fits their goals and their loved ones' abilities to manage their inheritance. The wealth transfer process includes deciding whether to leave a loved one an outright inheritance or to pass their wealth down in a more controlled manner.
Is Outright Distribution the Right Choice for Your Loved Ones?
According to a USA Today survey, about 76 percent of Americans receiving an inheritance say they plan to save or invest it, 40 percent say they will use it to pay off debt, and 21 percent want to leave the money to their children.[2]
Another survey found that, among those expecting to receive an inheritance, 50 percent consider it "highly critical" or "critical" to their long-term financial security and retirement.[3]
The most straightforward way to transfer wealth is by outright distribution. An outright distribution is fast and simple, and there are typically no fees associated with it. There are also no strings attached. When a beneficiary receives an outright distribution, they are free to use, sell, or manage the money and property however they want, with no conditions, restrictions, or oversight.
However, an outright inheritance may not be in the beneficiaries' best interest. For someone unprepared to handle an inheritance, not only could the money fail to solve their financial problems, but it could also worsen them or lead to new ones.
In spite of their best intentions to budget, invest, and responsibly spend an inheritance, your loved ones could just as easily squander it on impulse purchases, risky investments, or financial scams.
More than a quarter of respondents admitted to USA Today that they plan to use their inheritance for travel or luxury spending.[4] Many (72 percent), according to a Citizens Bank survey, also admit that they are unprepared to manage an inheritance.[5]
One downside of an outright distribution is that if a beneficiary has debt, something many young people struggle with, a creditor might be able to make a claim against the beneficiary and take their inheritance even before they can benefit from it.
Certain beneficiaries may not be legally able to receive an outright distribution. If the recipient is a minor child, for example, or is incapacitated (unable to manage their affairs) and does not have an agent under a financial power of attorney, a court-appointed conservator may be necessary to receive and manage their inheritance for them.
Balancing Financial Responsibility and Personal Circumstances
None of this is to say that outright distributions are inherently bad. Deciding whether to leave an outright inheritance to a beneficiary depends heavily on their personal situation. Even within the same family, children can have wildly different financial aptitudes and attitudes. Some are perfectly capable of managing their inheritance. Others struggle to plan and save for the future.
There can also be a gap between what children plan to do and what they end up doing. Parents may sometimes need to protect their children from their own bad habits.
No matter how much you plan to leave to a beneficiary, it can be a source of pride and fulfillment to know you are making a difference in their life. A Northwestern Mutual survey found that, among those expecting to leave an inheritance, more than two-thirds (68 percent) said it is their "single most important financial goal" or is "very important."[6]
However, leaving an inheritance can also be a source of trepidation. Six in 10 parents told Northwestern Mutual that their children do not value financial responsibility the same way they do, with more than half expressing concerns that this difference in values could negatively impact the family's assets when they pass from one generation to the next.[7] And only about a quarter of adults feel prepared for, and confident in, the wealth transfer process, Edward Jones research found.[8]
When deciding what method of distribution is best for your child, it helps to know their current financial situation and their short- and long-term financial goals, such as paying down debt, buying a home, giving to charity, and saving for education. This knowledge starts with a family discussion about wealth transfers. We would love to be part of the conversation and answer any questions you have about estate planning how to leave your money behind.
[1] Julie Sherrier et al., Study: Gen Z and millennials plan to use inheritances to invest, pay off debt, USA Today (June 6, 2024), https://www.usatoday.com/money/blueprint/credit-cards/study-great-wealth-transfer-plans.
[2] Id.
[3] As $90 Trillion "Great Wealth Transfer" Approaches, Just 1 in 4 American Expect to Leave an Inheritance, Northwestern Mutual (Aug. 6, 2024), https://news.northwesternmutual.com/2024-08-06-As-90-Trillion-Great-Wealth-Transfer-Approaches,-Just-1-in-4-Americans-Expect-to-Leave-an-Inheritance.
[4] Julie Sherrier et al., Study: Gen Z and millennials plan to use inheritances to invest, pay off debt, USA Today (June 6, 2024), https://www.usatoday.com/money/blueprint/credit-cards/study-great-wealth-transfer-plans.
[5] Most Americans aren't ready for the ¢ÂÂGreat Wealth Transfer,' Citizens, https://www.citizensbank.com/learning/great-wealth-transfer-survey.aspx (last visited Mar. 21, 2025).
[6] Northwestern Mutual, supra n. 3, https://news.northwesternmutual.com/2024-08-06-As-90-Trillion-Great-Wealth-Transfer-Approaches,-Just-1-in-4-Americans-Expect-to-Leave-an-Inheritance.
[7] Id.
[8] The Great Wealth Transfer Starts with the Great Wealth Talk, Edward Jones Research Finds, Edward Jones (Feb. 27, 2024), https://www.edwardjones.com/us-en/why-edward-jones/news-media/press-releases/great-wealth-transfer-research.
2024-04-04 by Sue Hunt
An intrafamily loan is a financial arrangement between family members—one who is lending and another who is borrowing. An intrafamily loan may be used to help a family member who needs money for a number of reasons:
Lending to a child or grandchild can be satisfying. Your loved ones can benefit from flexible repayment terms and interest rates while learning financial responsibility. This can be beneficial if the child or grandchild would otherwise have difficulty obtaining a loan through more traditional methods. It also gives you an opportunity to add to your investment income.
How you give or loan money to family members has potential tax implications. The right method depends on your family circumstances.
An intrafamily loan might be beneficial in estate planning for wealth transfers between generations while minimizing estate tax implications. Further, by using an intrafamily loan to provide money to a family member rather than making a gift, you can maintain control over the principal amount and how it is used.
Intrafamily loans are valuable tools for preserving wealth and offer the following advantages:
Under current tax law, gift and estate taxes are not imposed on gifts up to $13.61 million for individuals and $27.22 million for married couples in 2024. While many people's net worth is not that high, intrafamily loans may be a great option for high-net-worth families.
If the family member receiving the loan invests the money and the investment returns on the borrowed funds exceed the interest rate charged, the excess growth is passed to your family member without being subject to gift or estate taxes. This strategy preserves your lifetime estate tax exemption amount as long as all of the formalities of issuing a loan are observed. However, the initial loan amount (the principal) and interest owed to you will still be included in your taxable estate because the principal and interest are legally required to be paid to you. However, as previously mentioned, the growth in the investment will not be included in your taxable estate.
You might also consider loaning the money to a trust for the benefit of your family member as part of your planning strategy. As opposed to the strategy of loaning funds directly to your family member, the loan would be made to the trust. If the rate of return from investing the loan proceeds exceeds the loan's interest rate, the excess is considered a tax-free transfer to the trust.
With intrafamily loans, you have the flexibility to set the interest rate at a level lower than commercial lenders, as long as the rate is not below the Applicable Federal Rate (AFR) (read below for further discussion on the AFR). The cost savings for the borrower can be significant. Further, if the AFR is high when you initially make the loan, it may be easier to reissue the note from you to take advantage of any future lower interest rates than it would be to refinance a note from a third-party lender.
Intrafamily loans can play a crucial role in transferring a family business from one generation to the next. By providing financing to family members who wish to take over the family business, for example, you can ensure a smoother transition and help sustain the family legacy.
Determining the interest rate for your intrafamily loan is crucial to avoid unnecessary tax consequences. The Internal Revenue Service (IRS) publishes AFRs monthly, broken down into three tiers for short-term, mid-term, and long-term rates. Rates can be fixed or variable and structured to the advantage of both parties. The minimum AFR rate must be charged for loans over $10,000 regardless of a loved one's credit rating, and it is usually lower than most commercial lenders. If the interest rate for your intrafamily loan is below the AFR, the IRS may require you to pay income tax on the income you should have received under the applicable AFR even though the borrower did not pay you that amount (called imputed interest). Also, the amount of interest you did not collect but should have may also be considered a taxable gift to the borrower, potentially reducing the amount of gift and estate tax exemption available to you.
Since the IRS generally assumes that wealth transfers between family members are gifts, it is essential to have the proper documents showing that the transfer is intended to be a loan. You and your family member must sign a promissory note that adheres to the state-specific rules to properly document the loan transaction.
A comprehensive written promissory note is crucial. It helps avoid unnecessary tax consequences and clearly communicates the terms of the loan between family members to avoid misunderstandings and conflicts.
Every financial decision has the power to strain family relationships. When trying to determine if an intrafamily loan is right for your situation, ask the following questions:
You must carefully consider the decision to gift versus use intrafamily loans, including the income, estate, and gift tax implications. The tax rules regarding intrafamily loans are complex and may result in unintended consequences if the loan is not done correctly. If you already have an intrafamily loan in place, it is important to properly document it in your estate plan to ensure that everything will proceed smoothly if you pass away before the loan has been paid back. We are happy to meet with you and your tax advisor to make sure that this strategy is right for you and your family.
2024-04-08 by Sue Hunt
As a parent, you are responsible for the care of your minor child. In most circumstances, this means getting them up for school, making sure they are fed, and providing for other basic needs. However, what would happen if you and your child's other parent were unable to care for them?
It is important to note that if something were to happen to you, your child's other parent is most likely going to have full authority and custody of your child, unless there is some other reason why they would not have this authority. So in most cases, estate planning is going to help develop a plan for protecting your child in the event that neither parent is able to care for them.
What If You Die?
When it comes to planning for the unexpected, many parents are familiar with the concept of naming a guardian to take care of their minor children in the event both parents die. This is an important step toward ensuring that your child's future is secure.
Without an Estate Plan
If you and your child's other parent die without officially nominating a guardian to care for your child, a judge will have to make a guardianship decision. The judge will refer to state law, which will provide a list of people in order of priority who can be named as the child's guardian—usually family members. The judge will then have a short period of time to gather information and determine who will be entrusted to raise your child. Due to the time constraints and limited information, it is impossible for the judge to understand all of the nuances of your family circumstances. However, the judge will have to choose someone based on their best judgment. In the end, the judge may end up choosing someone you would never have wanted to raise your child to act as your child's guardian until they are 18 years old.
With an Estate Plan
By proactively planning, you can take back control and nominate the person you want to raise your child in the event you and the child's other parent are unable to care for them. Although you are only able to make a nomination, your choice can hold a great deal of weight when the judge has to decide on an appropriate guardian. The most common place for parents to make this nomination is in their last will and testament. This document becomes effective at your death and also explains your wishes about what will happen to your accounts and property. Depending on your state law, there may be another way to nominate a guardian. Some states recognize a separate document in which you can nominate a guardian, and that document is then referenced in your will. Some people prefer this approach because it is easier to change the separate document as opposed to changing your will if you want to choose a different guardian or backup guardians.
What If You Are Alive but Cannot Manage Your Own Affairs?
Although most of the emphasis is on naming a guardian for when both parents are dead, there may be instances in which you need someone to have the authority to make decisions for your child while you are alive but unable to make them yourself.
Without an Estate Plan
Not having an incapacity plan in place that includes guardianship nominations means that a judge will have to make this judgment call on their own with no input from you (similar to the determination of a guardian if you die without a plan in place).
With an Estate Plan
A comprehensive estate plan can also include a nomination of a guardian in the event you and the child's other parent are incapacitated (unable to manage your own affairs). Although you are technically alive, if you cannot manage your own affairs, there is no way that you will be able to care for your minor child. This is another reason why having a separate document for nominating a guardian (as described above) may be preferable to nominating guardians directly in a last will and testament. Because a last will and testament is only effective at your death, a nomination for a guardian in your will may not be effective when you are still living. However, a nomination in a separate document that anticipates the possibility that you may be alive and unable to care for your child can provide great assistance to the judge when evaluating a guardian. Depending on the nature of your incapacity, this guardian may only be needed temporarily, with you assuming full responsibility for your child upon regaining the ability to make decisions for yourself.
What If You Are Just Out of Town?
Sometimes, you travel without your child and will have to leave them in the care of someone temporarily. While you of course hope that nothing will go wrong while you are away, it is better to be safe than sorry.
Without an Estate Plan
Without the proper documentation, there may be delays in caring for your child if your child were to get hurt or need permission for a school event while you are out of town. The hospital or school may try to reach you by phone in order to get your permission to treat them or allow them to attend a school event. Depending on the nature of your trip, getting a hold of you may not be easy (e.g., if you are on a cruise ship with little access to phone or email). Ultimately, your child will likely be treated medically, but the chosen caregiver may encounter additional roadblocks trying to obtain medical services for your child, and they may not be able to make critical medical decisions when needed.
With an Estate Plan
Most states recognize a document that allows you to delegate your authority to make decisions on behalf of your child to another person during your lifetime. You still maintain the ability to make decisions for your child, but you empower another person to have this authority in the event you are out of town or cannot get to the hospital immediately. This document allows your chosen caregiver to make most decisions on behalf of your child, except for consenting to the adoption or marriage of your child. The name of this document will vary depending on your state and is usually effective for six months to a year, subject to state law. Because this document is only effective for a certain period of time, it is important that you touch base with us to have new documents prepared so that your child is always protected.
We Are Here to Protect You and Your Children
Being a parent is a full-time job. We want to make sure that regardless of what life throws at you, you and your child are cared for. Give us a call to learn more about how we can ensure that the right people are making decisions for your child when you cannot.
2024-03-11 by Sue Hunt
When creating a last will and testament (commonly known as a will), one of your most important considerations is who to choose to serve as the executor (also called a personal representative) of your estate.
As the name implies, the role of the executor is to execute the instructions that you provide in your will. You may give your chosen executor some discretionary powers in determining how your assets (money and property) are to be distributed, but they have limited latitude to make independent decisions. Any deviation from their specified powers could cause a conflict in your estate that leads to legal consequences.
To avoid any unnecessary complications in the settling of your affairs, take care to avoid ambiguous or unclear language in your will. If there are any doubts about your last wishes, the executor and beneficiaries may wish to consult with an estate planning lawyer to discuss next steps.
Upon the death of the testator—the person who made the will—probate will be opened if the testator died owning accounts or property in their sole name and without a properly completed beneficiary designation form.
Probate is the court-supervised process in which the testator's will is validated and administered. The person named as executor in the will initiates and carries out the probate process. The probate process can vary slightly from state to state, but generally unfolds in the following manner:
These steps imply that the decedent has, in fact, left a will. Dying without a will—known as dying intestate—entails much greater court involvement. The court appoints an executor, identifies heirs, and determines who gets what. Dying intestate can even empower the state to choose the guardian of your minor children.
It may not be possible to avoid probate completely (e.g., if a guardian appointment is required for a minor child, if an executor must represent the decedent in a pending or new lawsuit, or if the decedent died with assets solely in their name and without a designated beneficiary). Probate duration and costs, however, can be reduced through careful estate planning.
The executor named in a will is responsible for carrying out the testator's final wishes. The executor is a liaison between the probate estate and the probate court, as well as between the probate estate and the beneficiaries. Their duties include locating and valuing assets of the estate, paying debts, and distributing assets to beneficiaries in accordance with instructions in the will.
Executors owe a fiduciary duty to the estate and its beneficiaries that compels them to act in the best interests of both. Because an executor may also be a beneficiary of the estate, their actions may be scrutinized to ensure they are acting fairly and legally.
The executor must, to the best of their ability, carry out the directions expressly stated in the testator's will. They cannot make changes to the will, but there are cases where the executor can use discretion when settling an estate. The testator might explicitly give discretion to the executor, or the need to exercise discretion may arise due to ambiguity in the will, as in the following examples:
If the will is unclear, the executor should seek clarification from the court to assist with interpretation. Anyone with a stake in the estate may also raise a legal challenge against the executor, asking the court to remove the executor or commencing probate litigation against them.
When a gray area exists within the provisions of the will and the executor acts in good faith and within the scope of their power and duties, the court may uphold their actions. A petition to remove an executor or a lawsuit against the executor for breach of fiduciary duty will only succeed if there is evidence of misconduct, such as the executor explicitly going against the will or estate's interests, acting in their own best interest, or withholding an intended gift from a beneficiary.
While the executor and beneficiaries cannot rewrite a testator's will after the testator has died, the beneficiaries may be able to mutually agree to modify what they receive from the estate.
Making changes to distributions can be done using a document known as a nonjudicial settlement agreement. A nonjudicial settlement agreement is a contract that may be used whenever the beneficiaries agree that asset distribution should be different than what the will stipulates, including in these situations:
A nonjudicial settlement agreement can be a way to resolve a loved one's legal challenge to the will. The court should respect this agreement if it meets applicable legal requirements. However, before signing an agreement to change the provisions of the will, the beneficiaries should consult with a probate attorney so they understand whether this type of agreement is legally recognized in their jurisdiction, along with what the implications and potential consequences would be.
In addition to assisting with a nonjudicial settlement agreement, there are many issues related to probate that might require attorney assistance.
Executors, beneficiaries, and anyone who feels they have been treated unfairly in a will may need to consult with a probate attorney about interpreting and administering the will, determining their rights and duties under state probate law, and potentially challenging the will in court. In addition, when creating your will, it is crucial that you set out your intentions in a way that minimizes the potential for conflict among everyone involved.
Get legal help with a will or probate issue: contact our law office and schedule a consultation.
2025-02-04 by Sue Hunt
If you've recently tied the knot or have been married for a while and have acquired more assets, you might be considering joint ownership. While it seems like a straightforward and convenient option, it might not always be the best choice depending on your situation.
After getting married, some couples choose to add each other to their existing bank accounts, brokerage accounts, and real estate as joint tenants with rights of survivorship (JTWROS). This means both of you have equal rights to the property, and if one of you passes away, the other automatically inherits the deceased's share without needing to go through probate.
For example, if you and your spouse own a bank account as JTWROS and one of you dies, the surviving spouse becomes the sole owner of the account once the necessary documentation is provided. While this might seem like an easy solution, there are some potential pitfalls.
Joint ownership can lead to problems, especially if the relationship is unstable. Here are some common issues:
A comprehensive estate plan, such as using a trust to hold your assets, can better control and protect your property. Whether due to creditor issues, incapacity, or death, the right estate plan ensures you and your spouse can continue enjoying your assets as intended while minimizing potential taxes and court costs.
It's important to consult with an estate planning professional to understand your options. If you've recently gotten married or are acquiring additional assets with your spouse, contact us at 336-373-9877 to learn about the best approach to owning your assets.
2026-05-13 by Julia Walker
Does Buying a Home Affect Your Estate Plan? 3 Myths Debunked
Myth 1: Buying a home does not affect my estate plan.
A home is often your most significant illiquid asset and a key part of your financial portfolio. If it is not properly titled or coordinated with your estate plan, your home may not pass to whom you would like in the way you intend. Updating your estate plan after a home purchase helps ensure that the transfer and management of your property is handled smoothly, avoids unnecessary delays or probate complications, and protects your family’s ability to remain in the home.
Myth 2: My estate plan automatically covers my new home.
While your will or trust may include general language covering your assets, it may not fully address a home purchased after these documents were initially created. If your estate plan has not been updated, it may not specifically address how you want your new home handled or who should receive it. Reviewing your plan with an attorney ensures that your new home is properly accounted for and aligned with your overall wishes.
Myth 3: If something happens to me, my spouse will automatically be able to stay in the home.
A surviving spouse may or may not be able to remain in the home, depending on factors such as how the property is titled, whether there is a mortgage, and how your overall estate plan is structured. For example, if the home is solely owned by the spouse who dies rather than jointly owned or properly held in a trust, the property may need to go through a court-supervised probate process before the surviving spouse has full legal authority over it. Even when the surviving spouse has the legal right to remain in the home, affordability may still be an issue. If there is too little life insurance or other available funds to cover the mortgage, taxes, insurance, and upkeep, the surviving spouse may face financial pressure and even need to sell the home. Coordinated planning can help ensure that your family has not only the legal ability to remain in the home but also the financial resources to maintain it.
