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Listen now! Generational wealth transfer: How, why, and what to know

In this podcast, we share what works and what to avoid when it comes to passing along wealth.

Three family members stand on a beach

Let’s Talk About Wealth is a new podcast series that touches on compelling topics for families of wealth. Through stories and conversations with specialists from Wells Fargo Private Bank, we help listeners learn how others have discovered ways to make more of an impact with their wealth — including generational wealth transfer.

Host: Noah Thomsen

Guests:

Rich Brown, a fiduciary advisory specialist with Wells Fargo Private Bank.

Allison Gregory, a wealth advisor with Wells Fargo Private Bank.

Sangita Karra, senior philanthropic specialist with Wells Fargo Private Bank

Podcast transcript:

[Noah]:

Transitioning your wealth: when do most people start thinking about it? Well, there’s no magical moment. But there’s no question that the transition of your wealth comes with an emotional component. Plus, the financial and legal workings of how and when it should be done. With all that in mind, you begin to grasp the enormity of this topic.

Welcome to Let’s Talk About Wealth. I’m your host, Noah Thomsen. In this episode, we’re going to share how others have approached the transition of their wealth, and offer ideas about what works, what to avoid, and ways that could set you up…for a successful outcome for your family.

Joining us first is Rich Brown, a fiduciary advisory specialist with Wells Fargo Private Bank. Rich, welcome to the show.

[Rich]:

I’ve been looking forward to it. Thanks.

[Noah]:

I hear you’ve been doing this for a while. Handled hundreds of these wealth transitions. Have you noticed any big changes in trust planning and wealth transfer among families lately?

[Rich]:

I’d say the biggest change I’ve been seeing is a generational one.

[Noah]:

In what way?

[Rich]:

Well, you know it used to be that the trust – or when I say that I mean the estate plan – was drawn up and put aside until the patriarch or matriarch passed. But with people living longer (frankly now into their 90’s or more) most of the family wealth may not find its way to the next generation until the 2nd generation is in their 60’s or even their 70’s.

I’m seeing a desire to transfer assets a lot sooner, even gifting in the moment. Clients may decide to transition some assets that can help people in the family with personal goals, pressing needs, or even supporting some great opportunities for family members, or sometimes even close friends.

[Noah]:

Even close friends, in a moment of need, I can see that.

[Rich]:

Yes. I think another change when I say family wealth is recognizing we have clients who are domestic partners, or single, or perhaps married couples with no children. They all have a supportive family or a very personal network around them, life-long friends, grown siblings, foundations they hold dear. Families really come in all shapes and sizes.

[Noah]:

Very true. The other thing that struck me about what you said is when your clients gift their assets sooner, is it because they can actually see the impact of their gifts now?  And feel good about it?

[Rich]:

That’s right.

[Noah]:

Does it make much of a difference in their planning approach if someone decides to actively transfer assets while they’re alive rather than planning for after they pass?

[Rich]:

Well, it means that the estate plans of our clients who are making gifts while they are alive are constantly evolving. Changing tax policy can add further complexity to their decisions. Because of the evolving needs of their estate, I check in frequently and help advise how, for example, a trust can evolve to meet new objectives that may arise. We’ll bring in other professionals – so think CPAs, tax attorneys, and other specialists – to talk through options and strategies.

[Noah]:

Are there other concerns about wealth transfer? Something they want to talk about?

[Rich]:

Well, if their beneficiaries are younger, there’s often concern, frankly even a fear for some, of spoiling their children — their high school age or young adult children. They ask us, how do you set up boundaries? They want to help their kids to be successful, but not to give them so much resources that they lose their drive, or feel entitled in some way.

In those opportunities, I’ll introduce family dynamic specialists to talk with families on topics along those lines. Any way we can help, we do.

[Noah]:

Rich, you shared a lot of insight into what your clients need, and what they’re thinking about. Thank you for that.

[Rich]:

Happy to help. And thanks for having me.

Music

[Noah]:

Next, we’re going talk about the transition itself. The fiduciary aspects and responsibilities of executing and transferring family wealth. Here to share her experiences is Allison Gregory, a senior wealth advisor with Wells Fargo Private Bank.

[Allison]:

Hello, Noah. 

[Noah]:

So, as an advisor, what situations are most common when the transition of assets unfolds?

[Allison]:

If we’re talking about the transition of wealth upon someone’s passing, one scenario is very orderly. Everything has been talked through, beneficiaries know what to expect. There’s a feeling of gratitude and peace.

Another scenario is often a family member is named as the executor or trustee. But, with significant wealth and complicated holdings, the person may be overwhelmed by all the fiduciary activities required by law. Not to mention having to navigate family expectations. It’s a huge responsibility.

[Noah]:

Anything else you’ve seen?

[Allison]:

Yes. But luckily, not too often.

[Noah]:

Ok.

[Allison]:

Beneficiaries who are at odds.

[Noah]:

Oh, that…

[Allison]:

Yes. Unfortunately, there are times that the family may not be on the same page. It can get heated and very personal, even spark litigation.

[Noah]:

Any advice on how to overcome those last two situations? The trustee being overwhelmed, or a family in conflict?

[Allison]:

Yes. There’s a way to turn either one toward a better transition. By using an independent executor or trustee.

[Noah]:

So, not someone in the family?

[Allison]:

That’s right. For example, you could name a bank or other institution as a successor fiduciary. Because that entity’s role is highly regulated, the corporate executor or trustee brings order and transparency to the transition of assets.

[Noah]:

How does it bring order, using this approach?

[Allison]:

We, I should say, the corporate fiduciary shares information with everyone involved at the same time. Here’s the legal document. This is what it says, here’s how and when it will be distributed, and what each of you is going to get. If family members or beneficiaries are challenging the will or trust, this can help diffuse a lot of tension. Because it’s simply the law. The transfer is handled exactly as it’s written.

[Noah]:

And what about the situation where a family member was named but feels overwhelmed?

[Allison]:

Well, it means you aren’t placing a burden on someone dear to you after you pass. The job of an executor or trustee can last months, years, even decades. There may be multiple properties, a family business transition, tax challenges, not to mention difficult conversations with family members who may want you to do things the documents simply do not allow for.

Naming an independent fiduciary brings objectivity. So, for the wealth creator, there’s confidence knowing your precise wishes will be met.

[Noah]:

Sounds like smart, peaceful option to consider. Thanks, Allison.

[Allison]:

Thanks so much, Noah.

Music interlude

[Noah]:

Sure, transferring wealth can have its share of family drama. But the transfer of assets can also happen with generosity, good intentions, and promising outcomes. That path – often taken – is philanthropy.

Joining us now is Sangita Karra, senior philanthropic specialist with Wells Fargo Private Bank.

[Sangita]:

Thanks for having me.

[Noah]:

Sangita, I’m sure most people of wealth are very charitable. But philanthropy feels much bigger. How do you talk to your clients about it?

[Sangita]:

There’s not necessarily a right way to do philanthropy. It’s very personal. Some choose to spread their wealth to a range of foundations and causes. Some focus on one specific thing. Like education, the environment, or their community.

[Noah]:

But how do you as a specialist start with a client? Is there a process?

[Sangita]:

Well, first we want to help bring clarity around why they give. We ask about their family values or a mission statement they follow. We spend a lot of time listening. Then the next thing to focus on is how to give.

[Noah]:

What do you mean by how to give?

[Sangita]:

Well, there’s a great tool we use that’s called an intentional giving plan. It’s a great way to uncover an individual’s giving history.

[Noah]:

Interesting.

[Sangita]:

We start by talking to them to gather all the history around their giving and then we create a report. And we put this together in a graphic illustration so that the individual can visually see where they’ve been giving, how much, and to what organizations. And what we find is that they’re often very surprised by what they see.

[Noah]:

Surprised, in what way?

[Sangita]:

They’re surprised that a lot of their giving actually doesn’t align with their core values.

[Noah]:

I think there’s a preconception that philanthropy is about large foundations – family foundations with large endowments.

[Sangita]:

Historically, I’d say you were right that foundations really were the cornerstone of philanthropy. But that’s really changing right now. Creating a foundation can be a lot of work. It requires creating an actual entity that’s sort of its own living and breathing entity, and there can be a lot of work involved. The work that some clients really enjoy doing, and work that some clients really don’t want to be bothered with.

As a client of Wells Fargo Private Bank, we can take on all the administrative work on behalf of the client. That includes cutting checks, managing the grant-making process. It can be very helpful. But now, we’re seeing a trend towards a newer, more efficient philanthropic vehicle.

[Noah]:

Oh, interesting. How would those work? How are they different?

[Sangita]:

Yes. So, the way it can work is that you can donate assets through these vehicles, even unique assets. I even had a client who once donated a roller coaster.

[Noah]:

Wow. Philanthropy sure is fun.

[Sangita]:

Well, the asset (the rollercoaster, in this case) gets sold and liquidated. Then that person is able to take a full charitable deduction for the full value of that gift. And the vehicle allows you to make charitable gifts at any time.

[Noah]:

Why is that different?

[Sangita]:

With private foundations, you are required to give 5% of the value of the foundation every year.

[Noah]:

So this other way of giving that you’re talking about is much more flexible.

[Sangita]:

That’s right. And one other vehicle more clients are discovering is called a charitable remainder trust. It’s a great way to be philanthropic and support a cause, but also for clients to be sure their family is taken care of first.

[Noah]:

That sounds really helpful. Sangita. I’m curious, what else do you see changing in philanthropy?

[Sangita]:

In The Private Bank, we’re seeing more clients who are entrepreneurial, having great success at a younger age — even as early as their 30’s and 40’s. And I’m seeing that people are thinking about philanthropy at a much younger age.

[Noah]:

What do you think is making that change in behavior?

[Sangita]:

Well, I think people are getting motivated by what’s going on in the world — environmentally, the many social issues, things like that. And as a result, clients are accelerating their philanthropy and instead of waiting until they retire, or just naming charities in their will, they’re acting now.

[Noah]:

Sangita, thank you for sharing the new things you’re seeing in philanthropy.

Well, that’s our show. I hope we’ve given you some details, stories, and insight into transitioning your wealth. Join us again for Let’s Talk About Wealth. This is Noah Thomsen. So long.

What can Wells Fargo do for you?

As you think about your legacy and wealth transfer goals, take time to sit down with your wealth management professional and outline your vision.

Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.

Brokerage services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.

Wells Fargo Bank, N.A. offers various advisory and fiduciary products and services including discretionary portfolio management. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, a separate non-bank affiliate, may be paid an ongoing or one-time referral fee in relation to clients referred to the bank. The bank is responsible for the day-to-day management of the account and for providing investment advice, investment management services and wealth management services to clients. The role of the Financial Advisor with respect to Bank products and services is limited to referral and relationship management services.

Wells Fargo & Company and its affiliates do not provide legal or tax advice. Please consult your legal and tax advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.

Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.

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