Northwestern Mutual
< Back to Insights & Ideas

Reinventing Retirement: Passing Your Legacy on to Multiple Generations

Insights & Ideas Team •  April 15, 2015 | Your Finances

Baby Boomers are reinventing retirement. Rather than winding down and stepping to the sidelines, many of today’s retirees see retirement as a “second act”—a time to enjoy the financial security they’ve built, and an opportunity to share that wealth with their loved ones. And, unlike their grandparents, who typically spent years, not decades, in retirement, Boomers are the first generation that can count on living well into their 80s and even longer. Along with longer lives comes another challenge: the need to rethink estate planning from the perspective of a multigenerational family.

At Northwestern Mutual, we believe everyone should have a financial plan, which may include an estate plan that takes into account both your needs and those of your family. Your plan should also be designed to pass your wealth on to your heirs in the most efficient way possible.

ReinventingRetirement2Like many parents, your goal may be to leave your children your assets. However, since we’re living longer, when the time comes to pass along your wealth, your children could easily be on the cusp of retirement, likely sitting on the most money they have ever had. By passing all your wealth outright to them at this time, you could unknowingly leave them with a potential and unexpected tax burden if you or your children have a large enough estate. You can avoid this by creating an estate plan that passes your wealth to multiple generations by using a trust.

A multigenerational trust enables you to create a legacy for family members over several generations while providing potential income, estate and generation-skipping tax benefits. It also enables you to determine when and how your beneficiaries will receive their money. You can establish this trust during life or at the time of your death.

Many people like to use life insurance to fund a multigenerational trust because it provides legacy and tax benefits for their children and grandchildren without significantly repositioning existing assets during life.

Another option to consider is making additional gifts to family while you’re alive. You might consider things like funding education for grandchildren, or paying for things like life insurance for grandchildren or even great-grandchildren. Finally, consider spending your money on big experiences. Your family may be more appreciative of a big family trip while you’re still alive rather than getting a bigger pot of money after you’re gone.

It’s important to work with a professional who has a comprehensive view of your financial situation, as well as that of your heirs. A Northwestern Mutual financial professional can help you identify the most effective way to pass your legacy on to your heirs. That may include passing your wealth along to multiple generations after you die, and making long-lasting memories with your loved ones while you are living.

Rate This Article