Multi-Generational Estate Planning
Multi-Generational Estate Planning
By: Mark A. Oller, Vice President

The first step to estate planning is to take inventory of what you have, while keeping in mind what you expect to have in the future. That includes long-term appreciation of securities, real estate, and other investments you own. It also means determining what you and your spouse can expect to inherit from your parents once they pass away.

This aspect of estate planning isn't always as obvious - or as easy to discover. That's because no matter how close extended families are, they don't always share financial information. But for you to get your estate planning underway, you need to understand the full breadth of your estate - present and future.

It's important to take a diplomatic approach when asking parents about what you can expect to inherit. The best tactic may be to approach the issue from your own perspective, explaining that you're starting to do your own long-term financial planning, and need to understand their financial situation first. It may also be helpful to solicit the services of a financial planner or elder law attorney, as a third party can often lend credibility and alleviate the fear that children are selfishly prying into their parents' financial matters.

Obviously, your goal - and that of your parents as well - is to minimize the taxes heirs will have to pay on assets inherited upon your death. How your parents structure their estate plan, including the use of trusts, gifts, IRAs, insurance, pensions, and wills, can have a significant effect on how you should set up yours.

For example, if you're the beneficiary of your parents' estate, but you have enough money to provide for retirement through the end of your life, you may opt to use a Qualified Disclaimer to pass on your parents' assets directly to your children, thereby avoiding estate taxes on your parents' estate.

On the other hand, say that since your parents' estate is arranged to pass directly to you, you decide you won't require the bulk of your own investments to provide for your financial future. You may instead wish to structure your investments to accumulate more quickly and transfer tax efficiently to your children.

You could accomplish this with an IRA, for example. By specifying that the required minimum distribution from your IRA be based on the combined life expectancy of you and your child, your minimum required distribution would be lower - leaving more money to grow tax deferred throughout your child's life. If you instruct your child to maintain the account instead of cashing it in when you die, he or she may inherit far more than the original account value you would leave upon your death. Keep in mind that this type of IRA structure does not avoid estate taxes, and it's best to pay these taxes with other assets from your estate.

As you can see, there are many ways to structure your estate plan for future generations. However, a plan is never complete unless you have all of the elements and objectives determined from the outset. This, however, requires the inevitable discussion with your parents.

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.


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