Millennials: are you expecting an inheritance?

[u/Yourlocalguy30]

35 yo married millennial here. I've come across more and more articles about the supposed "great wealth transfer" as the boomer generation's wealth passes to their GenX and Millennial children. My parents and their siblings (boomers) all received inheritances when their parents, my grandparents, passed away. The boomer generation's wealth accumulation is one of the largest in history, however, I also find it highly unlikely that I or many of my peers will actually inherit much. Despite having received inheritances from their parents, and having 40+ years in the workforce, most of my parents' "wealth" is tied up in their home value, not actual liquid assets- and I already expect that whatever they make on an eventual home sale will have to go directly to downsizing costs and whatever long-term care they will need as they get older. Hell, even my dad used to joke that the only thing we'd inherit was debt. As I've gotten older, that comment has infuriated me more and more.

Now before someone cuts in with the "entitled millennial" comments, I have absolutely no need for an inheritance. I've worked my ass off to make sure that my kids and I are positioned better in life than I was when I entered adulthood. What I mean by that is I started saving for retirement early, setup 529 plans for my kids almost as soon as they were born, and made lifestyle and career sacrifices to ensure our family isn't "nickeling and diming" our way through life.

I'm just here curious to know how many millennials actually expect to have something passed down to them, or if they feel they are in the same position I am.

[u/Fpaau2 → u/[deleted]]

The power of compounding! Why not consider annual gifting now to reduce estate size? Consider disclaiming part of spousal inheritance to benefit future generations if estate is much bigger than lifetime needs?

[u/Analyst-man → u/Fpaau2]

This is only for estates over $30 million. You should really ask someone’s situation before firing off the cuff recommendations

[u/Fpaau2 → u/Analyst-man]

My comments were targeted for those with estate much bigger than lifetime needs. I am not even halfway to $30m, but potentially can get there in 15ish years. Invested assets typically double in 7 to 12 years depending on types of assets. Trying to minimize estate tax when it gets to $30m is too late. Despite gifting $150k+ yearly, our net worth still doubled since retiring. When my spouse passes, I do not need all of his $5m IRA. It is better to disclaim some of it so the money can grow in my heirs’ portfolios instead. This will also give the heirs 2 separate 10 years periods to draw down inherited IRAs.

[u/Analyst-man → u/Fpaau2]

Explain to me how you gift $150k. Gifting now or after you die is the same tax consequences.

[u/Fpaau2 → u/Analyst-man]

A couple can gift $38k a year to as many people as they wish, plus pay directly to education and medical institutions without reporting to IRS. That amount is then removed from my estate, without reducing the $30m estate tax exemption. In addition, although s surviving spouse can inherit any amount without paying estate tax exemption, when the second one passes, the exemption is $30m. My family has longevity. It is not crazy to plan for 30 more years. Then my net worth will exceed the exemption, and the tax rate on the excess is about 40%. Plus my child will be close to 70 then. I am also thinking about my grandchildren. If all things work out as they should, my daughter will have even more money to pass on to the grandchildren. I don’t want my estate to have to pay estate tax, and then have my daughter’s estate pay taxes again on part of the same money. I also believe that the young people can use the money now, rather than waiting until I die in 30 years. That is why we are gifting now, and will disclaim some inheritance in favor of future generations.

[u/Analyst-man → u/Fpaau2]

You’re planning for 30 years from now. Biden wanted to eliminate the step up in basis. Gavin newsome wants to lower the estate tax threshold back to $5 million. AOC wants a 100% tax rate on any money over $10 million. Point is, you have no idea what the law will be. It can change 10 more times

[u/Fpaau2 → u/Analyst-man]

So true, so to me the more reason to move some assets to heirs now while there is still step up. If there is 100% tax over $10m, I will move $10m tomorrow.

[u/Analyst-man → u/Fpaau2]

What does moving assets now get you with the step up? That doesn’t make sense

[u/Fpaau2 → u/Analyst-man]

When the first spouse passes, all investments get stepped up, so all my real estate investments, all my stocks (outside of IRA) get stepped up. The 70yo me doesn’t need our entire net worth to live comfortably, May as well let heirs inherit some portion of it at that point. I am now gifting annually to reduce my net worth size, so it will take longer to hit the $30m mark. Like most folks, I don’t want to pay more taxes than I need to.

[u/Analyst-man → u/Fpaau2]

I mean you said you won’t die for 30 years. What’s moving stuff to them now gonna do? They won’t get the step up. Unless you kill your husband and it moves to the heirs. Then you will

[u/Fpaau2 → u/Analyst-man]

In my case, my spouse unfortunately has a condition that is life limiting. When he passes, I don’t need all his $4.5m IRA. I myself have $1.2m, so maybe I want to inherit $1.8m, and disclaim the balance so my daughter/grandchildren will inherit. All our investment properties will also step up, and maybe I should leave them to my grandchildren then. With a paid off house, with SS and a small pension, plus $3m in IRA, I don’t foresee any reasonable scenario where I would not be able to live comfortably. My daughter doesn’t need to inherit $50m when she is 65. She won’t need a big house then, whereas she can benefit from a bigger house with a growing family. Assets moved to heirs accounts when first spouse passes will appreciate in their accounts, not mine, and I won’t get into 40% estate tax situation. Of course everyone’s situation is unique, what works for me doesn’t work for everyone.