Expert Wealth Transfer and Family Estate Planning Tips to Help You Pass Your Wealth — and Your Legacy — to the Next Generation

Legacy can mean different things to each of us as we consider our family estate planning and wealth transfer and what we hope to leave behind for the next generation. Is your priority to leave security for your children and spouse? To endow a building on the campus of your alma mater? Or is it most important that your loved ones remember you every time they hold a keepsake item or engage in a favorite tradition?

To explore strategies for wealth transfer and family estate planning, Make It Better Media Group held a special virtual event presented by Lyric Opera Wine Auction that tapped into the expertise of David A. Handler, a trust and estate attorney with Kirkland & Ellis, and M. Zach Mangels, a financial adviser with Private Ocean. Susan B. Noyes moderated the event, during which Handler and Mangels shared essential ideas for estate planning, philanthropy, and legacy in all its senses.

Here are eight key takeaways to keep in mind when planning your own legacy. Some of these tips apply only to those who expect to leave estates large enough to be subject to inheritance tax, while others can be useful to people with a range of net worths.

1. Legacy building begins long before the end of life

You can begin passing on your values and wealth today, the experts said.

Financially, the earlier you begin to transfer wealth to the next generation, the less likely you are to lose part of your estate to inheritance tax. Each year, an individual is allowed to gift up to $15,000 per recipient without counting toward the lifetime gift tax/inheritance exemption of $11.7 million. For a married couple, that’s $30,000 per year, per recipient.

“Let’s say you have two kids, and four grandkids; you could give $30,000 to each of them — or about $180,000,” Mangels said. “That can be a pretty powerful thing to do during your lifetime on an annual basis.”

Another reason to start passing on wealth now: The lifetime gift/inheritance tax allowance is scheduled to be cut in half in 2026, and could decrease even earlier.

“The Biden administration is talking in earnest about reducing that exemption sooner. Using that exemption before it is reduced can beat the clock,” Handler said.

In another aspect of legacy building, it’s never too soon to begin sharing your values with the next generation. For example, Mangels works with a couple who are laying the groundwork now for their children to continue their practice of meaningful, ongoing charitable contributions.

“They involve their kids in their annual charitable process. They have been doing this for about 10 years. In their teens now, the kids have causes of their own that they are passionate about,” Mangels said.

2. Education is a gift that can’t wait

Sometimes, the reason for passing on wealth now is so you can enjoy the results in your lifetime.

Mangels shared the story of a client whose priority was to ensure their grandchildren got a great education.

“They couldn’t really wait until they pass away to do that, because their grandkids are going to grow up,” Mangels said. So they calculated how much they could afford to help with tuition now, while still fulfilling their own needs for the rest of their lives. “They’re able to see the impact this is having on their grandchildren’s lives via the successful and rewarding careers that they all have.”

3. Historically low interest rates make now a great time for wealth transfer 

Most of us know that the Federal Reserve’s decision to keep interest rates low has made this a great time to refinance a mortgage. Handler explained that low rates also present a wealth transfer opportunity.

He shared some advanced wealth transfer techniques that estate attorneys can help clients carry out. One avenue is creating something called a grantor trust, then loaning money to it. The advantage of low rates here: The IRS requires you to collect interest on the loan, at a rate tied to the market. Right now, the interest rate you’re required to charge is exceptionally low, meaning that more money stays in the trust instead of being paid back to you. The trust beneficiaries get to keep any growth from investments.

“I could lend $20 million to a trust for my children at 1 percent interest,” Handler said. “If they invest those funds and make 2 percent, 3 percent, even 8 or 10 percent, they get all of that money.”

4. There are multiple ways to use gifting to avoid or reduce capital gains tax

People often overlook ways to bless others using assets other than cash — and avoid taxes in the process. For instance, you might realize that some tech stocks you purchased decades ago have ballooned in value, and you want to share that good fortune. You sell the stock, donate the proceeds to charity, then use the charitable gift tax deduction to offset the capital gains tax you just incurred. 

An alternative solution would be to avoid capital gains tax altogether, Magels said: “Instead of selling the stock, you can gift it directly to the charity. Because charities are tax-exempt entities, when they sell that stock, they’re not going to pay any capital gains for it.”

Gifts of appreciated stock can also be useful for passing wealth to the next generation. If you want to help your kids buy a house, instead of liquidating stock to give them cash, consider transferring appreciated stock to the kids. Then they can sell the stock and pay the capital gains tax. If they’re in a lower income tax bracket than you, that’s an overall tax savings.

5. Some bequests are better for charity, others are better for heirs

If you have both tax-advantaged accounts such as IRAs or 401(k)s, and other assets to distribute among heirs and charity in your estate, efficiently allocating those assets can make a big difference in the overall tax burden.

When you leave IRAs, 401(k)s or a similar tax-advantaged retirement account to an heir, the withdrawals are taxable.

“However, if you leave the same account to a charity, the proceeds won’t be taxed,” Mangels said. “Instead, you could leave assets to heirs that don’t come with the same tax burdens, such as a Roth IRA, a taxable account, or real estate.”

6. Consider where your bequests will make the biggest impact

“Think about the cost of leaving money to charity, versus your kids,” Handler said.

If you have an estate large enough to be subject to inheritance tax, keep in mind that state and federal taxes combined could reduce the amount your heirs receive by as much as half. Depending on the state, an asset given to a tax-exempt charity would effectively be worth twice as much as an asset given to heirs.

“Let’s take a million dollars and assume it would be subject to state estate tax (as well as federal). If I leave that to my three kids, a million becomes $500,000, so they get $166,000 apiece. Not bad — but we started with a million,” Handler said. 

If you have already taken advantage of wealth transfer allowances during your lifetime, your kids may already be at a place where this amount of money isn’t going to make a major difference in their lives. 

“A million dollars to charity is going to be meaningful,” Handler said.

7. Sometimes the most treasured bequests aren’t financial

When legacy planning, don’t forget about keepsakes, which may have more lasting value in the hearts of your heirs than stocks or cash.

Mangels shared a touching example from his own life.

“My mom passed away when I was 19,” he said. She left her sons some pieces of jewelry along with a note explaining the significance of each. “I received this men’s ring with a Z on it. Z for my name, but also Z for Zanesville, which was the town that she grew up in.” In the letter, his mother told him, “This is as a reminder to always remember your roots.”

One way that legacy builders can leave such information to heirs is in a document called an ethical will, Mangels said. While it’s not legally binding, it can be a way of conveying your wishes for how heirs use their inheritance.

“You can use an ethical will to document the things that are most important to you and stories you want to share,“ Mangels said.

8. Never forget to look out for number one

Don’t give til it hurts.

“The first step of any financial plan is ensuring that your needs are met,” Mangels said. “Then you layer on your legacy goals, and you quantify what you can comfortably give away during your life and how much would be left over at death.”

Handler cautions clients against giving away any assets that are going to cause them to lose sleep.

Besides making sure to put aside ample assets for the rest of your life, your attorney should make any trusts as flexible as possible, Handler said.

For instance, you might include your spouse as well as your children on a trust, so that your household still maintains access to those funds during your lifetime. The way a trust is structured can include opportunities for the grantor to change the conditions if needed, he said.

“Make sure there’s an escape clause,” Handler said.


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Carrie Kirby

Carrie Kirby spends a lot of time asking people about something they think about but rarely talk about: money. Her work on personal finance, business and technology has appeared in San Francisco Magazine, Consumers Digest, Wise Bread and more publications. Carrie’s most recent work about her other love, travel, appears in The Best Women’s Travel Writing: Volume 10. She lives on an island (Alameda) with her husband and three kids, and blogs about getting them all where they need to go without owning a car at carfreemom.com.