The Great Wealth Transfer

About 45 million U.S. households will transfer over $68 trillion in wealth over the next 25 years.

On November 20, 2018, CNBC reported that baby boomers are the wealthiest generation in American history and that they will turn over the most wealth ever to next generations.
The article said: “yet that exchange might not be as large as you had hoped if you don’t take the right estate planning steps”. Today, we look at the CNBC topics from an estate litigation perspective. Pitfalls of some potentially good advice are offered here. This is intended to be a helpful high level consumer guide for people considering acting on suggestions offered by CNBC’s journalist MacKenzie Sigalos in her recent article . We follow her topic headings here.


The first point made in the CNBC piece was that you should ensure there’s still some wealth to pass down. In our practice we are often exposed to client problems exacerbated by procrastination. Delays in coming to grips with one’s mortality and the decisions associated with the inevitable can erode the base of wealth built over years of hard work and careful savings. Risks of dementia or a more catastrophic illness can crush or destroy the ability to plan by a loss of capacity. Time is often an important requirement of a well thought out plan. Great estate plans often need time to evolve and work to preserve, gift or unfold wealth accumulated over a lifetime.

Preservation can be ruined by risks of loss. Do consider whether adequate insurances are available. Insurance comes in many forms to address a host of risks. Health, life, liability and long term care insurances must all be considered. Insurance costs are often thought to be high, but it is often well worth the cost when asset protection or wealth preservation is at risk. For example, long term care costs can quickly consume all assets. An auto accident where you are at fault can create liability in excess of policy limits fast where someone is seriously hurt. If your work exposes you to suits you must consider the adequacy of insurances. A proper life insurance product can often cover debts and taxes as well as make the surviving beneficiaries wealthy.

We often focus on the facts associated with the decision making of the decedent in our practice. Do they appear to have been clear minded and associated with a rational process? Were there strong and disinterested competent professional advisors involved in an effort to protect assets or preserve wealth? What was the outcome of the effort?

Death & taxes

CNBC ‘s story recognized correctly that most estates are below the current estate tax exemption. That point is pertinent to the federal rules. However, the rules can be tricky if you have made gifts or the state estate tax threshold differs from those of the federal rules.

What is the correlation between the overall value of the estate relative to its liquidity? Were strong and smart decisions made pre death as well as post death within the context of the administration of the estate? Post death, does the accounting by the fiduciary state that the assets were properly handled in order to timely pay appropriate estate taxes?

Set up a trust

This direction appears in the CNBC article with this heading. While that approach can be a positive technique for some people, sometimes funding the cost of the work to make the trust, including efforts to retitle assets into the trust, simply are not worth it for many people. A good question to ask is what is the objective to be achieved? Is the trust intended to be for asset protection – is it for protection from predators, creditors and other nefarious interlopers who may try to benefit from the grantor or her beneficiaries?

We look at the purpose for the trust. Was the intended purpose legitimate and sound? Not everyone needs a trust.

Sometimes trusts are written unclearly or contain mistakes. Some trusts are unclear as to who is intended to benefit. In those instances a construction proceeding in court before the Surrogate Judge is required. Ordinarily that focuses on the issue of the decedent’s intent at the time that the trust was signed. In many cases we represent the fiduciary and call the drafting attorney as a witness to testify under oath for the trust or estate to prove the decedent’s intentions at the time the trust was written.

Consider a living trust

This concept is promoted in the article as a suggested manner by which to avoid probate. The article stated that avoiding probate keeps your wishes private. We have seen many instances where this type of work is not done correctly or completely creating a nightmare for the survivors. Trusts must be properly funded in order for them to work. Unfunded or partly funded trusts present a problem. It often culminates in both a probate proceeding as well as a trust administration. In those instances there is no privacy and often double the legal work in the end. Sadly, the legal work that had been done earlier in connection with the living trust is often of little to no value to the client and her survivors.

In one case, we found that the trust had been fully and properly set up, and the attorney’s legal file closed. When the decedent died it was discovered that a deed was never prepared to transfer the home from the decedent’s name to the trust during her life. This defeated the exact purpose of the trust, as it was intended to hold the house and then pass it on after the decedent’s death to the survivors.

We find that the living trust requires a high degree of continuing attentiveness to ensure that all assets are transferred in it. Otherwise, assets that remain outside the trust may be found to pass to unintended persons.

Our Conclusions

With all of this wealth soon to pass there are many opportunities for good intentions to go awry. Surely this will lead to lawsuits and challenges to good solid estate plans where great work of highly competent planners will be successfully defended. It is crucial that lawyers doing the estate planning and their clients remain highly focused on the desired outcome and objectives of their work together. When we defend estate planning work we find that very often the best work is that tailored for the individual client. Estate plans are personal. Where the legal work is carefully done by a planner to state the instructions of the decedent on the documents the outcome is usually very good. The passage of this great wealth in America will not be without challenges. It is important for the consumer to remember that there is no one size fits all in the estate planning practice.

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