Planning for the Great Wealth Transfer (10:33)
TheGreatWealthTransfer represents an estimated $84 trillion transfer from Baby Boomers to younger generations and charitable organizations
Broadcast Retirement Network’s Jeffrey Snyder discusses how to plan for the great wealth transfer with Hamilton Capital Partners’ Alonso Munoz.
Jeffrey Snyder. Broadcast Retirement Network
This morning on BRN, planning for the great wealth transfer. Joining me now to discuss this and a lot more, Alonzo Munoz is the chief investment officer for Hamilton Capital Partners. Alonzo, great to see you.
Thanks for joining us on the program this morning.
Alonso Munoz, Hamilton Capital Partners
Jeff, it’s good to be here.
Jeffrey Snyder. Broadcast Retirement Network
Yeah, I’m excited to talk to you. And I know we have similar backgrounds. We were talking before in the virtual green room about that.
We’ll hopefully get into that. I want to start off by talking about the great wealth transfer. $84 trillion is expected to be transferred from boomers in the silent generation to millennials, Gen X, etc.
By 2045, this presents a great opportunity for wealth managers. But it also, Alonzo, is important in terms of estate planning and wealth planning.
Alonso Munoz, Hamilton Capital Partners
Well, it is. And Jeff, as you said, the numbers are really staggering. I mean, the biggest wealth transfer that we’ve ever talked about, really.
So, you know, it is an interesting opportunity for financial advisors, for wealth advisors, wealth managers to get in touch with that younger generation. I think that, you know, for the most part, the financial advisors, the people that advise folks with wealth or business owners, etc., etc., they’re talking to the patriarch or the family or the mother and the father, if you will. It’s time to start reaching down, you know, into the other generations and start to have those conversations.
And, you know, one of those first pieces are family meetings. One of the first sort of action step is to have family meetings and to bring those younger generations into the fold and into the conversation. What we have seen, Jeff, from our standpoint is there’s a little bit of hesitancy.
The parents are not ready, in a lot of cases, to bring the whole family and have those conversations about wealth that are very personal and are emotional. And in some cases, the children don’t know how much wealth the family really has. And we run into that all the time across our clients, whether they’re business owners or high net worth families.
So it is a really interesting piece. We’re going to have to wait and see how it plays out. But I’m sure we’ll talk a little bit more about this.
There are things that advisors and families and business owners, etc., can do to start to get prepared for this transfer.
Jeffrey Snyder. Broadcast Retirement Network
Yeah. And you bring up a really good point. And I know one of the areas of focus for your practice is you mentioned some of the smaller businesses.
You know, you don’t have to be uber wealthy to work on an estate plan or think about the wealth transfer. Right, Alonzo? I mean, you can be of modest means and have a business and want to think about transferring that business to your successors, your heirs.
Alonso Munoz, Hamilton Capital Partners
Well, I think you hit the nail on the head, Jeff. Sometimes the biggest piece is just getting started. And we run into this all the time.
We run into this complexity all the time where that younger generation, whether it’s the millennials or the generations right below them, they don’t have anything in place. They don’t have any plan in place themselves. So just getting started and getting those conversations going, I think, is a really interesting piece of the equation.
And for us, we see a lot of instances where we’re working on really sophisticated, complicated estate plans for high net worth families. But those same concepts of being prepared and getting a game plan and a blueprint apply to maybe some of the other types of clients we work with, which are just hardworking business owners or, you know, families that don’t have a will or don’t have a power of attorney or a health care directive. The concepts, those fundamental building blocks, Jeff, as we I’m sure we’ll talk more about, are really, really important.
It doesn’t have to be complicated. Just getting started, keeping it simple and putting some type of game plan in place can make a whole lot of difference, big difference in the long run.
Jeffrey Snyder. Broadcast Retirement Network
Yeah. And one of the areas, Alonzo, let’s talk about taxes. I think that’s an area that we all know we have to pay taxes.
Look, we just went through the tax day on the 15th, of course. But there are taxes associated with transferring wealth and transferring the money to your heirs. That can be planned for, correct?
I mean, you can take the appropriate steps to kind of mitigate or lessen the tax hit, if you will.
Alonso Munoz, Hamilton Capital Partners
You certainly can. I mean, there are all types of different strategies. And we work with a lot of estate attorneys and tax advisors to come up with, you know, all types of different roadmaps in terms of sheltering assets and protecting assets from taxes or from liability.
And when you really dig down into it, Jeff, there’s so many options that it really makes sense to spend some time with someone that’s a professional that can walk through different options. Some, for example, just to give you a little bit of color, we run into instances where clients have to make a decision whether they want to use revocable trust or irrevocable trust, meaning trust that you can make changes to and amend and do away with and trust that you really can’t. And the different types of options that you have within them for asset protection, but also to shelter taxes from taxes.
But if we bring it down just a little bit, I think most of us really don’t have to get that sophisticated and that complex. The way that the law currently reads is that the estate tax per person is nearly $14 million. And so for a married couple, they have a lot of bandwidth, a lot of wiggle room at passing to transfer on assets to their heirs, to their children, to philanthropy without incurring a lot of taxes.
And so it leads us back to this conversation, Jeff, of just get started. Keep it really simple. Put some fundamental pieces in place and happy to dig a little bit deeper.
But those are the conversations we’re having right now with clients.
Jeffrey Snyder. Broadcast Retirement Network
In terms of let’s talk a little bit about charitable giving, because I think that is an area potentially that could be overlooked and could be very helpful both with terms of taxes, but also bequeathing some or all of your assets, for that matter, to a charitable charity of your choice, something you believe in. Are you seeing a lot of clients kind of include that in their estate plans and wealth transfer plans?
Alonso Munoz, Hamilton Capital Partners
Well, we’re seeing almost like a barbell approach, if you will. There are some families that are just inclined to lean into philanthropy and they have causes that they care about. For a lot of folks and for a lot of our clients, that would be the church.
And that’s something that they’re passionate about and they give to the church or certain causes that are near and dear to them. In other cases, we’re still in the conversations where the parents don’t know exactly what to do or the folks with wealth don’t know how to pass this on to the next generation. And that’s where trust planning and the estate planning really comes into the conversation.
But certainly there are different avenues that folks can take now to start to give away their wealth or to start to think from a philanthropy standpoint or charitable standpoint. And we’re having those conversations all the time as well.
Jeffrey Snyder. Broadcast Retirement Network
Yeah, I mean, there’s certainly tax benefits to doing that, but also a feel good or contribution community aspect to doing that as well. Changing gears completely 180 degrees. I want to ask you about retail investors and the private markets.
By private markets, I mean things like hedge funds, private debt, private equity. Are you seeing a lot of clients, and it may not be within the state plan, but it may be in the financial plan, considering some of these investments, even though in the past that they have not been considered an accredited investor under the law?
Alonso Munoz, Hamilton Capital Partners
Well, Jeff, I think what we’re seeing is at the industry level, we’re seeing this push democratization of investing, if you will. That’s what the institutions are calling it, to open up investments to everyday folks like you and I to invest in private equity and hedge funds and more sophisticated products. And we’ve thought about this and spoken to our clients about this over the last couple of years.
It comes with a warning flag because traditionally us retail investors were used to maybe buying equities or buying mutual funds or ETFs. Alternative investments come with their own rulebook, if you will, about liquidity and when you can take money in and out. The risk associated with locking capital up into these private deals that maybe aren’t as easy to access as the public markets or 401k or whatnot.
And we’ve seen this happen a little bit with the crypto industry, right? The younger generation wants access, more access to things that traditionally have been blocked off, whether it’s by limits in terms of wealth or size, but also by platform. And we’re seeing record keepers, we’re seeing investment providers and houses start to lean into allowing these private assets, not only just to retail investors, but going even a step further, allowing this in 401ks.
And it’s something that frankly, Jeff, three or four years ago, we were totally against private assets in 401k, specifically crypto when crypto was really taking off crypto and 401ks. But now the market evolves and I think perspectives change a little bit that why should just the big guys and the big dogs have access to these investments where retail investors also should have an opportunity to invest in these private markets. And we’re watching it very closely to see how it develops, not only from a regulatory standpoint, but investor appetite for these assets.
Jeffrey Snyder. Broadcast Retirement Network
Yeah, certainly things are heating up. I mean, you look at these investments there in public pension plans, as you said, endowments, foundations. So those investors, those institutional investors have access.
I guess it’s kind of a wait and see. We’ll see what the new administration and Department of Labor and other regulatory bodies determine. Alonzo, we’re going to have to leave you there.
Always great to talk to you. Thanks for joining us. And we look forward to having you back on the program again very soon.
Alonso Munoz, Hamilton Capital Partners
Great to see you, Jeff.
Jeffrey Snyder. Broadcast Retirement Network
And don’t forget to subscribe to our daily newsletter, The Morning Pulse, for all the news and what plays details, of course, at our website. And your subscription helps support all this great BRN content, including today’s program. We’re back again tomorrow for another edition of BRN.
Until then, I’m Jeff Snyder. Stay safe, keep on saving. And don’t forget, roll with the changes.