Tools to Transfer More Wealth to Next Generation

A key part of planning for the future is to ensure stability for the next generation. With proper planning, there are several different ways the wealth of a family can be distributed to children and relatives that save on taxes as well as help out for the future.

With his expertise, Sim Gakhar can assist you with all your financial concerns.


Planning for the next generation

Through education and money management, the next generation can be assured that they are set up for success. So what are some successful strategies to transferring generational wealth?

There are many tax-free solutions to handing down wealth. Let’s take a look at some ways families ensure their wealth is distributed properly through generations.


Gifting the next generation

Gifts are a common way to hand down money without having to get taxed on the amount. Up to $15,000 can be gifted to a child as an annual gift tax exemption. Not only can one parent do this, but the spouse also can, for a combined total of $30,000 tax free.

Gifts can come in several forms such as property, mutual funds, or cash. Gifting to the next generation reduces how large the estate will be when someone passes away.

There is also a lifetime estate and gift tax exemption which states that you can give up to $11.7 million during your lifetime after the annual gift tax exemption of $15,000.

If you want to assist the next generation and avoid having the monetary value included in the annual or lifetime tax exemption, paying medical and educational expenses directly can be a great option. There is no limit to this type of gift.


529 Savings Plan

What better way to help out the next generation than assisting them with college expenses. The 529 Savings Plan is an investment account that is allowed to grow tax-free.

This is provided the funds in the account are used for college expenses such as tuition and fees, room and board, computers, and books. If funds are withdrawn that don’t qualify, they will be subject to a 10% tax.

Besides college expenses, funds can also be used for private K-12 schools with a $10,000 limit.

Each state has their own limit on how much you can contribute yearly. Some states even offer a partial income tax break by putting funds into the savings plan.

If the beneficiary of the 529 Savings Plan doesn’t use all of the funds due to getting a scholarship or possibly not finishing college, the funds can stay in the account and transfer to a new beneficiary.

When looking at the limit for gift tax, keep in mind that contributing to a 529 counts as a gift, while paying the college directly does not.


Irrevocable trusts

This is another way many families reduce the taxable amount of their estate. An irrevocable trust is a way to create a gift in the present moment despite having some concerns on how the next generation may use the wealth. Click here to Learn more about different types of trusts.

In a trust, a child is named a beneficiary with the stipulation they can not use the funds until a specified age. Be aware, if these funds happen to create earnings, the child will have to pay taxes on them.


Intra-family lending for the next generation

If a family is planning on helping out their children with major purchases such as buying a home or starting a business, the IRS gives them special interest rates to do so. Called applicable federal rates, this allows a family to loan money at a rate lower than what a commercial loan would typically be.


Educating the next generation

A large portion of wealth is often lost from generation to generation. This is commonly due to a lack of education by those receiving the wealth.

Families often are reluctant to talk about monetary issues related to inheritance with their children. Not having this open line of communication can be a major mistake.

Parents should educate the next generation by creating long-term goals and objectives. They should be taught the ins and outs of money management to ensure wealth for the generation after them as well.

Setting children up at an early age with bank accounts to teach concepts like savings is important to get them into the right mind frame for the future.


Life insurance

Life insurance is a fairly cheap way to prepare the next generation should the unfortunate circumstance of a death in the family occur. This ensures the next generation has the money to pay for any funeral expenses or any other debt that may have been incurred.

Life insurance benefits can be paid to the next generation in one lump sum or through installments over the course of time.


Writing a will

Declaring how you want your assets to be distributed is an essential step in the passing of generational wealth. Having a will is key to ensuring this happens. To learn more about how to create a will, click here.

Having the next generation decide themselves on how to divide up assets can be a tough situation. Having a clear, concise will takes out part of the frustration on what to do with the assets should something unexpected happen.


Naming beneficiaries

A key part in making sure the next generation incurs any wealth from the family is in the assignment of beneficiaries. For accounts as simple as a bank savings to complex as stock options, ensuring beneficiaries are named makes sure the assets stay in the family where they are intended to be.

Typically this is only addressed with things such as life insurance policies, but this should be looked at for all aspects of the estate in the planning of a will.



Through education and making smart money moves, a family can assist the next generation in prospering. Starting at a young age, children can prepare for their future by concepts instilled in them at a young age.

As you can see, there are several ways to pass down wealth in the family. In assisting the next generation with funding for expenses that will arise, the older generation eases the burdens of those who follow them.


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