Rethinking the Inheritance Timeline

For years, wealth advisors have been discussing the implications of the Great Wealth Transfer—the expected shift of some $124 trillion from older to younger generations over the next two decades.¹

However, longer lives are beginning to upend this expectation: Instead of passing on wealth in their 70s, as originally anticipated, many estate holders aren't doing so until their 80s, 90s, or beyond. The unintended consequence is that heirs often don't receive their inheritances in time to help with pressing financial milestones, like buying a first home or funding a child's education.

So, how can retirees ensure their savings can support a longer lifespan while also helping heirs at critical junctures in their lives?

Here are three tips to plan for these competing needs.

Regardless of investors' net worth, market volatility and rising prices often discourage giving during their lifetimes. As generous as you might wish to be with your heirs, it can be daunting to part with money you might conceivably need in the future.

However, with a good financial plan in place, there's no reason you can't support your own objectives and provide for your heirs.

To help ensure your planning reflects your current and future situations, start by reviewing the following details with your wealth advisor:

• Spending needs: Do your income projections and withdrawal rates support a longer lifespan?
• Healthcare costs: Have you added a buffer for future healthcare shocks, including potential long-term care expenses?
• Market uncertainty: Have you factored in the possibility of higher inflation or lower portfolio returns?
• Discretionary spending: Does your plan holistically address expenses, including those associated with your discretionary goals like travel and charitable giving?

Getting a clear, comprehensive picture of your expenses, income, and resources can give you a better understanding of how much financial wiggle room is available to help your heirs now.

If you still have concerns about outliving your savings, discuss with your wealth advisor whether it makes sense to build additional risk mitigation into your plan via lower-risk investments with less growth potential but more stable returns. You might also consider whether an annuity with a lifetime guaranteed income stream is worth adding to your portfolio.

Once you feel secure in your financial and estate plans, you might consider accelerating your transfer timeline so you can see the effects of your gifts firsthand.

For those whose estates may eventually exceed the lifetime estate tax exemption—$15 million per individual in 2026—making strategic use of your annual gift tax exclusion is critical. In 2026, you can give any number of people up to $19,000 each per year without incurring a taxable gift or eating into your estate tax exemption.

To maximize your gifts, consider:

• Front-loading college savings: You can contribute up to five years' worth of annual gifts to a 529 account in a single tax year without drawing down your lifetime exemption, so long as you treat the gifts as occurring over five consecutive years for tax purposes.
• Direct payments: Medical and tuition payments made directly to a healthcare provider and college or university on behalf of an heir don't count against the annual gift tax exclusion.

Beyond annual gifts, you also could consider several trust options that may allow you to maintain access to or receive income from assets for a specified term before gifting the remainder to your heirs. For example:

• A grantor retained annuity trust (GRAT) is a fixed-term, irrevocable trust that allows you (as the creator of the trust) to receive annuity payments that pay the value of the trust's assets back to you in their entirety—plus a fixed-interest or "hurdle" rate set by the IRS. When the term expires, typically in two to 10 years, any growth in the invested assets above the hurdle rate passes to the trust's beneficiaries without gift or estate taxes. (Naming grandchildren as the GRAT's beneficiaries could trigger generation-skipping transfer taxes.)
• A qualified personal residence trust (QPRT) lets you transfer your personal residence to an irrevocable trust that grants you the right to live in the house for a specified number of years before transferring it to your beneficiaries. Like a GRAT, a QPRT is a "bet-to-live" strategy, meaning you must survive the trust term to receive the estate tax advantages. If not, the property returns to your taxable estate.

Trusts are complicated vehicles, so it's important to consult an estate-planning attorney who can walk you through the various strategies' benefits and risks.

When deciding when to make gifts, also consider your own retirement timeline. Many retirees have larger expenses during the early "go-go years" thanks to hobbies and travel. If you're planning for a lively start to retirement, you might reduce or wait to implement your gifting plan entirely until you reach the "slow-go years," when you're less active and likely less worried about outliving your portfolio.

No matter how much wealth you have, it's understandable to feel uncertain about the future. That's why it's important not to leave things to chance.

Speak to your adult children about your concerns and wants—and how they may influence your gifting timeline—then give your kids an opportunity to share their own. Understanding their needs, as well as their hopes for the future, can help you put a plan in place that best serves everyone.

You might even include them in a conversation with your financial planner or wealth strategist, who can offer guidance on creating and executing a plan that aims to meet the needs of all involved.