Are You Ready for the Great Wealth Transfer?

What You Don’t Know Could Cost You More Than Just Money

Trillions of dollars are going to exchange hands over the next 20 years. That’s not happening in glitzy casinos or on trading room floors. It’s going to occur across generations and within families. Those who aren’t ready could lose out massively when it comes to estate taxes, building generational wealth, and preserving more hard-earned assets for the future. 

They could also be setting the stage for high-stakes misunderstandings and bridge-burning family conflicts that could have been prevented with thoughtful strategies and a few key pieces in play ahead of time.

Here’s why, with a deeper look at:

For more actionable insights on estate planning and probate in Texas, check out our Guide on the Grounds for Challenging a Will in Texas, our Guide to Blended Family Estate Planning, and our Small Business Guide to Texas Trusts.

Whenever you’re ready for specific answers related to your circumstances and needs, contact TAW Law Texas. 

The Great Wealth Transfer: What Is It & Why Does It Matter?

The Great Wealth Transfer refers to a generational shift of assets — an estimated $84 trillion — from Baby Boomers to younger generations, primarily Gen X and Millennials. Already underway and expected to continue for the next 20 years, the Great Wealth Transfer is both unprecedented and full of promise, serving as the single largest transfer of wealth in U.S. history. 

With that, there could be several challenges that arise. Many of those boil down to planning failures and oversights that could result in:

• Excessive estate tax liabilities
• Contested wills
• Fractured family relationships
• Lost legacies

For Texans, successfully navigating this complex transition can require some forethought and a proactive approach to estate planning. That’s true for both those passing assets down and the beneficiaries on deck to inherit them.

Preparing for the Great Wealth Transfer: 10 Devices for Smoother Transitions  

Ideally, passing the financial torch on to beneficiaries doesn’t involve wild surprises or big shocks. In the best-case scenarios: 

• The appropriate loved ones are informed about what’s happening, who gets what, and where the essential (and most current) estate planning documents are. 
• Devices like (but not limited to) the following are properly established and funded ahead of time.

With this framework, it can be possible to streamline asset transfers while minimizing the risks that expensive, stressful complications will disrupt the process. 

1. A Legal Will  

A will typically serves as the foundation of an estate plan because it can: 

1. Detail how assets will be distributed
2. Designate guardians for minor children
3. Name an executor to oversee the estate
4. Legally document your wishes.

Often providing crucial clarity in difficult times, wills can reduce confusion and map out exactly how an estate should be distributed.  

Without a will, you would pass intestate, leaving decisions about your estate to a Texas court and state intestacy laws. That may not align with your intentions or best serve your loved ones. It can also create delays in loved ones getting essential assets or, worse, the unintended distribution of assets to estranged relatives.  

2. Revocable Living Trusts

Offering exceptional flexibility during your lifetime, a revocable living trust allows you to retain control of the terms, assets, and other aspects of this device, so you can make changes as your circumstances evolve. 

Once you pass away, the trust becomes irrevocable, distributing the assets they hold to the beneficiaries you’ve designated in the manner you’ve specified, according to the terms of the trust. 

Without revocable living trusts, assets and estates may need to be probated, opening them up to public scrutiny, additional fees, and lengthy court processes. This can be particularly stressful for any beneficiaries who are depending on immediate access to an inheritance.  

3. Irrevocable Trusts

An irrevocable trust permanently transfers assets out of your estate and into the trust. Once that happens:

• You no longer own the assets held by an irrevocable trust.
• You can’t “reclaim” the assets transferred into the trust.
• The trust will own those assets going forward. 

That structure can effectively shield the assets in the irrevocable trust from creditors, lawsuits, and other potential liabilities. Depending on how these trusts are set up and funded, they may also offer certain tax advantages, making them especially appealing for those focused on growing and passing on more generational wealth.

Without irrevocable trusts, significant portions of your estate may be subject to federal estate taxes or future creditors, reducing the inheritance available to beneficiaries and future generations.  

4. Irrevocable Life Insurance Trusts (ILITs)  

Irrevocable and useful in many estate planning applications, ILITs are designed to hold life insurance policies and proceeds to:

• Remove them from a taxable estate 
• Make death benefits more readily accessible to loved ones
• Provide some liquidity sooner to cover estate taxes and/or other expenses
• Reduce the chances that beneficiaries would need to sell off assets to cover costs that can’t wait for probate. 

With life insurance benefits in this type of trust, grantors (i.e., the trust-creating parties) can be assured that their beneficiaries have additional financial security when other assets may be tied up in probate.

Without ILITs, life insurance proceeds will likely be considered part of your estate, increasing its value and possibly its estate tax liabilities. Beyond that and potentially more worrisome can be the fact that benefits that need to go through probate can end up in creditors’ pockets before beneficiaries get them.  

5. Spousal Lifetime Access Trusts (SLATs)  

Also irrevocable, SLATs are trusts that one spouse sets for the benefit of the other. The grantor of a SLAT will fund it with assets that the other spouse will, then, be able to access during his or her lifetime. When the beneficiary spouse passes away, the assets remaining in the trust will be distributed to the designated beneficiaries, like children and/or other loved ones. 

Since the assets held in SLATs are removed from taxable estates, these trusts can be another useful device for generational wealth building and preserving more through the Great Wealth Transfer. 

Without SLATs, assets intended for a spouse and other loved ones could end up going to Uncle Sam and others. 

6. Intentionally Defective Grantor Trusts (IDGTs)  

An IDGT is an irrevocable trust intended to hold appreciating assets while letting the grantor — a party who no longer legally owns those assets —  pay income taxes on what the trust earns from them. 

As another way to reduce the value of an estate, IDGTs are “defective” in name only, serving as a highly useful device for assets like royalties, real estate, business interests, and other income-earning items. With that, these trusts can be particularly advantageous for high-net-worth individuals or anyone inheriting high-value, appreciating assets. 

Without IDGTs, rapidly growing assets can remain in the taxable estate. That could balloon estate tax liabilities, costing beneficiaries more, while delaying access to assets because they now have to pass through probate.

7. Grantor Retained Annuity Trusts (GRATs)  

Irrevocable and set up for a specific period of time, GRATs are another trust designed for appreciating assets, with you as the grantor: 

• Transferring assets into the trust
• Collecting annuity payments from the trust at the frequency you’ve established (and in compliance with the law) 
• Continuing to collect these payments until the end of the trust’s term.

At that point, the assets remaining in the trust are usually distributed to beneficiaries without having to go through probate.  

Without GRATs, the full value of appreciating assets could be part of the taxable estate, increasing what may be owed in federal estate taxes while subjecting these assets to probate — and giving creditors a chance to claim a portion before beneficiaries do.  

8. Family Limited Partnerships (FLPs)  

An FLP is a legal device that allows multiple parties to transfer ownership of business interests and/or other assets into a shared mechanism to:

• Manage them 
• Transfer them in a tax-efficient manner 
• Shield them from potential liabilities

For those who operate family businesses or own complex holdings with other parties, FLPs can be a viable solution to the challenges of asset transfers, especially when high-value assets built over multiple generations are involved. 

Without FLPs, family business interests and other assets may be subject to probate, the public eye, and higher costs when it comes to transferring these assets to beneficiaries. There could even be fierce legal disputes over who inherits what if zero plans are in place, paving the way to will contests and contested probate cases. 

9. Special Needs Trusts  

Special needs trusts are irrevocable devices, designed to support loved ones with disabilities without interfering with their eligibility for government benefits. Often, these trusts are set up to ensure that beneficiaries have financial support for ongoing medical care and living expenses while putting some guardrails in place to prevent the misuse of the trusts’ funds

Without special needs trusts, direct inheritances could disqualify a disabled beneficiary from continuing to receive government benefits. That could create all-new exposures, potentially leaving them without essential financial and medical support.  

10. Generation-Skipping Trusts (GSTs)  

A GST is another irrevocable trust that can transfer assets while providing certain tax efficiencies. In particular, generation-skipping trusts let you:

• Transfer assets directly to your grandchildren or subsequent generations 
• Bypass the estate taxes your children (i.e., the “skipped” generation) would have faced.

Building on that with custom terms, GSTs are often one component of more complicated, comprehensive estate plans, putting another piece in place to mitigate tax liabilities while protecting precious assets. 

Without GSTs, each generational transfer of wealth could be subject to estate taxes, significantly reducing the amount that reaches your grandchildren and the generations that follow.  

More Potentially Helpful Estate Planning Devices

As effective as the above devices can be, they aren’t the only options for those looking to prepare for the Great Wealth Transfer. Others can include (and are not necessarily limited to):

• Spendthrift Trusts  
• Testamentary trusts
• Real estate privacy trusts (REPTs)
• Charitable Remainder Trusts (CRTs)  
• Qualified Domestic Trusts (QDOTs)
• Beneficiary Defective Inheritor’s Trust (BDITs)

These and other estate planning tools can be dialed in to address various needs, challenges, and assets. Identifying better options — and setting them up to work together to serve your objectives — can require the guidance of an experienced estate planning lawyer.

At TAW Law Texas, our team of estate planning attorneys has deep experience counseling clients through all aspects of estate planning, probate, inheritances, and more. Whether it’s time to protect your legacy or take on new financial territory, you can count on the lawyers at TAW Law Texas for extraordinary guidance, support, and representation. 

6 Tips for Executors in the Great Wealth Transfer

Executors can be integral in the transfer of generational wealth, standing at the helm of the process to advance it, ideally, with minimal disruptions and delays. 

Taking charge in these situations, especially when substantial assets and inheritances are on the line, can be like walking a tightrope with a blindfold on if you’re an executor who does not: 

1. Know Your Role and Responsibilities: Familiarize yourself with the legal obligations of managing and distributing the estate. If you are not up to the task for any reason (even with #6 below in play), consider passing on the role, so a successor executor can step in ASAP to keep things moving and take the next steps required.
2. Take Prompt Action: Texas probate has strict timelines that can start as soon as a decedent passes away. So, don’t prolong key tasks that are necessary to kick off the process, like finding the will, filing it with the local probate courts, and beginning to notify involved parties, like creditors and beneficiaries.
3. Inventory Assets Early: Start identifying and valuing all assets that comprise the estate after probate has been officially kicked off in the appropriate jurisdiction. If necessary, find experienced appraisers to evaluate assets like artwork, jewelry, real estate, and/or specialized collections. This process can take time, particularly for more extensive estates, which is why starting early is generally advised.
4. Stay Organized: Keep thorough records of all estate transactions, communications, and legal documents. This can include proof of actions that you take in your official role as “executor,” like creditors or paying estate taxes. 
5. Communicate Transparently: Keep beneficiaries informed about timelines, decisions, and key updates. Maintaining clear communication can foster trust and lower the risk of confused parties raising unnecessary or off-the-wall challenges that could derail an uncontested probate.
6. Partner with Professionals: Beyond appraisers for asset inventories, consider engaging CPAs and experienced lawyers, like the Austin probate attorneys at TAW Law Texas, to get additional support at each step of Texas probate.  

6 Tips for Beneficiaries in the Great Wealth Transfer

For beneficiaries, the next couple of decades could present all-new opportunities and responsibilities as inheritances are claimed. To take that on with more confidence and make the most of what’s next, beneficiaries can: 

1. Get to Know the Process: Few people know what Texas probate entails, and that’s OK. You don’t go through it routinely, so that can leave a lot of unknowns. Start filling in the blanks by educating yourself about probate, taxes, and your rights as a beneficiary. There are plenty of reliable sources, like experienced probate lawyers and law firms that can share insightful knowledge and give you a better idea of what to expect going forward. 
2. Be Patient: If assets have to go through probate, you won’t take ownership of them overnight or even in a few days. Probate can span weeks or longer because it takes time to verify wills, inventory estates, review creditor claims, and more. So, do your best to remain patient as the process moves through each stage. If you’re concerned that there’s a problem or delay, skip to tip #4 below. 
3. Consider Tax Implications: Some inherited assets could put certain tax liabilities in play, like capital gains taxes or income taxes. Get some eyes on what tax bills you could be looking at, based on your inheritance or what you plan to do with it. 
4. Keep the Lines of Communication Open: Ask executors and any involved professionals questions when you need answers. Don’t rely on assumptions or what a friend of a friend (e.g., a non-professional party who’s not involved) says. Open lines of communication can keep you on the same page as everyone else involved, minimizing the chances of confusion, missteps, and disputes.  
5. Make a Plan for Your New Assets: If you’re inheriting significant or specialized assets, like income-earning assets, real estate, or business interests, you may want to set up a new trust and/or another device(s) to manage the asset and glean additional potential benefits. Without a plan for these assets, they could be vulnerable to unexpected risks and losses.
6. Seek Guidance When Needed: Like an executor, you as a beneficiary can also have legal counsel and support through Texas probate. If you do, you’ll have an experienced professional in your corner, helping you verify that the proper procedures are followed and that your rights are protected through the process. 

A Prudent Way to Prepare for the Future & Protect Legacies 

No matter how the Great Wealth Transfer impacts you, the counsel and support of an experienced attorney may be integral to navigating the process on surer footing while protecting what matters most. 

To talk to experienced estate planning and probate attorneys in Austin, Texas, contact TAW Law Texas.

Email us or call 512-827-9212 to talk to a trusted
estate planning lawyer in Austin now.

Known for providing client-focused service, TAW Law Texas has a long-standing reputation for providing strategic counsel and value-based solutions. We routinely represent individuals, professionals, businesses, and other parties throughout Travis County, Williamson County, Bastrop County, Blanco County, Hays County, and beyond. 

We are also committed to going above and beyond to give our clients more options for resolving their legal matters. That’s why we offer two tiers of probate representation, including premium probate services. 

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Todd A. Wilson

Todd A. Wilson has been practicing law since 2007, with the aim of educating all strata of society and sharing crucial insights about the importance of estate planning, probate, and more.

The Law Office of Todd A. Wilson (also known as TAW Law TX) offers affordable estate planning and probate services.

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