4 Secrets To Transferring Assets Between Generations

Warren Buffett is giving 99% of his wealth to charity.  He thinks large transfers of wealth between generations is highly destructive.

I agree with him.  However thoughtful families may have more moderate and practical goals.  They may want to transfer a vacation home to children, fund a grandchild’s college educations or provide assistance to loved ones during a difficult time.

As an ill or elderly family member reaches the end it’s worth discussing the topic with family members.

Money and families bring up a lot of tension.  I’ve heard several family coordinators of care talk about lost relationships, contentious arguments and lost financial resources.

However it’s important to understand what options you do have.  You won’t have control over everything but knowing basic strategies can help.  It will enable you to make the appropriate suggestion at the right time.

In this post I want to enable you with the broad strokes for how to transfer an individual’s assets from one generation to the next.

Options To Transfer Assets

Below are some of the simplest methods to transfer assets from an ill or elderly loved one to a future generation.

1. Provide A Gift

Each year the federal government allows gifts of $14,000 tax free.  Anything over that amount will be taxed at 40%.

40%!  Many estates are taxed at this rate as well.  One of the most effective methods to avoid this tax is to offer gifts over several years.

Here’s an example:

Tom is newly 24 and newly engaged.  In three years he is planning to buy a home and to start a family.  His budget is for a $500,000 and he’s expecting to pay roughly a 20% down payment.

Grandma would like to help with the down payment on the home and gives Tom $14,000 a year over 3 years.  After the three years are up Tom has $42,000 accumulated to apply to his down payment.

Think ahead.  If your loved one has a large amount of assets it may be worth it to begin transferring the assets several years in advance.

2. Contribute To A College Fund

Many families are happy to fund two types of activities: education and health expenses.  One of the most effective measures of support is to contribute early to someone’s college fund.

529 funds are tax free vehicles that allow families to save for an individual’s higher education expenses.

There are some state specific restrictions for 529 plans but in general they are the most flexible college planning investment vehicle.

Anyone can set one up (doesn’t need to be family).  All withdrawals spent on education expenses are withdrawn tax free.

Make sure you check the administration fees on the plan.  Some are 0.2% while others can be as high as 2%.  This can make a significant difference in the amount of funds you will have down the road.

3. An Irrevocable Trust

There are two major types of trusts.  An irrevocable trust and a revocable trusts.  The main difference is that once assets are transferred to an irrevocable trust they cannot be changed.  The individual no longer owns them.  The trust does.  In a revocable trust they can be changed.

The reason why family coordinators of care may wish to consider an irrevocable trust for their loved one is that the assets in an irrevocable trust are not subject to taxes upon death (called probate taxes).  The assets in a revocable trust on the other hand incur probate taxes.

Make sure your loved one has enough to live on before putting assets in an irrevocable trust.  It’s an important decision that you cannot go back on.

4. Pay Directly For Expenses

My grandmother pays for healthcare related expenses for some of her grandchildren.  The impact is significant.

Paying directly for expenses has pro’s and con’s.  It enables the contributor to have full control over how the money is spent.  If they want to help with a specific activity they can guarantee that their money is used for that activity.

The administrative burdens however of paying bills can be too much. It may be helpful to have a family member take on the role of legal power of attorney for finances.  They can then play this role for their loved one.

Setting up any financial transfer of assets between generations is not easy.  With the above strategies you know what options you have available to you.

What Caregivers Should Know About Genetic Testing

Family coordinators of care often help loved ones cope with difficult diseases.  With advancements in medicine some of these diseases can be tied to genetics causes.  If a family coordinator of care is a blood relative or offspring they should consider genetic testing.

A doctor may advise an ill loved one to get genetic testing.  If results come back positive for a gene tied to breast cancer for example, this can have implications on children and siblings, who have a 50% chance of carrying the same gene.  However, having a certain gene does not means that you will necessarily go on to develop that condition, it simply increases your risk.

The implications of genetic testing are not just health related but also financial.  It is not always covered by insurance and certain types of insurance may be more challenging to obtain after genetic testing regardless of the result.

In this post I want to provide a brief overview of what family caregivers should know about genetic testing.  I want to enable you to know where to go for information.  I want to empower you with important financial questions to discuss with your family.

Genetic Testing Today

About 700,000 Americans have had a portion or all of their DNA sequenced.  As costs decrease that number is likely to rise in future years.  While genetic testing is in relatively early stages, roughly 50 genes have been linked to different types of cancers (National Cancer Institute has more info) .

Typically your relative will be tested first to see if there is any reason for concern. Many cancers that appear to run in families have no inherited gene, and providers generally avoid testing healthy people with no known familial gene. A doctor can refer you to a genetic counselor, who will review your family history and discuss the implications of testing.

While the test itself is a simple blood test, the difficulty often lies in the psychological stress that the results may cause you and your relatives. A positive result may lead to more frequent screening tests and feelings of guilt, anxiety, and depression. Before you pursue genetic testing it is important to consider how you will use that information to make sure that it is truly beneficial for you and your family.

A popular example is BRCA1 and BRCA2, two genes with a strong link to breast and ovarian cancer.  Angelina Jolie has this gene and publicly spoke out about her choice to pursue a preventative double mastectomy and later the removal of her ovaries.

As we learn more about the genetics of certain health conditions, genetic testing may change. If you are curious about your genetic susceptibility of disease, a genetic counselor can help determine whether testing is beneficial.

Genetic Testing Is A Large Financial Decision

Mapping your genome costs around $1,000.  Some insurance companies will cover the testing but only if recommended by a doctor.

Costs will likely continue to decrease enabling more people to pay for it out of pocket.  The largest cost, however, is insurance.

In 2008, Congress passed the Genetic Information Nondiscrimination Act (GINA) to protect consumers from genetic discrimination. Medical insurance companies cannot take genetics into consideration when pricing or deciding on if to offer a policy.  Unfortunately, this law only includes health insurance and does not include life, disability, or long-term care insurance.

The implications are serious.  Individuals who have sought genetic testing may be rejected or charged higher premiums. To avoid these consequences, many obtain these insurance policies prior to testing.

The Future Of Insurance & Genetic Testing

It’s unclear how the financial industry will deal with genetic testing down the road, however, they are incented to learn as much as they can about their policy holders.

While many companies do not currently ask about genetic testing, this may change as it becomes more common. In a NYT article Dr. Green, a genetics researcher at Harvard Medical School, shared that an insurance company executive told him, ,“We would [ask about genetic testing], but we don’t want to be the first.”

Discuss the below questions before getting genetic testing:

  • What will I do with the results? Is the knowledge beneficial to me?
  • Is it covered by my insurance?
  • Do I already have disability, long-term care and life insurance?
  • If not, am I willing to accept the risk that I may not be able to get it?
  • How costly is it for me to buy insurance now?
  • What is the cost of potential additional screening tests should the result be positive?

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Affordable Ways To Travel To See Loved Ones

Caregiving often comes with increased costs.  Travel costs in particular shoot up with flights to see Mom, vacations to connect with family and late night car trips to help with a medical emergency.

In these difficult times extra comfort can mean a lot.  A business class seat, a later flight time, a taxi home after a long day caregiving.

Once things stabilize there are opportunities to save money.  Travel becomes less last minute and more regular.

The purpose of this post is to provide you with methods to save costs on travel over the long-term.

I want you to feel that you can see your loved one many times without worry.  I want you to have the tools to save money conveniently.  I want you to have the mental freedom to focus on what matters – love and connection.

Travel Preferences

I have been traveling a lot recently.  Three out of every four weekends a month I’m on the road.  I’ve learned a few lessons along the way.

What really matters in travel:

  • Freedom to Read – This has lead me away from driving almost entirely. My mental relaxation comes with reading.
  • Freedom to Sleep – Sometimes what’s best is to rest. Again, no driving.
  • Minimal Delays – I hate delays. It’s something I need to work on ;).  I like to leave early.  Almost all forms of transportation run more effectively earlier in the day.
  • Cheap Travel – For a genuine emergency I have no problem spending $1,000 on a plane ticket. But I cut back in other weeks to save up for this event.  Caregiving is often a multi-month / multi-year process.

Travel preferences are personal.  Take a moment now and write down the small things that make a big difference to you.


Affordable Travel Strategies

Below are the most effective methods I have found to travel without breaking the bank.  Particularly if you have continuous travel plans to help care for someone over several months.

1. Take The Bus

I used to think buses didn’t exist anymore.  They were a relic of the 60’s and Catch Me If You Can.  The reality is that the bus industry is growing faster than both trains and the airline industry.

Most trips cost $30 – $100 if they’re under 5 hours on the road.  They can cost a lot less if you buy tickets in advance.  After trying out a few bus companies pick one and become a member.  The benefits are worth it.  Bolt Bus for example, gives you a free trip after 8 rides.

The rides are comfortable, air-conditioned, and come with free Wi-Fi.  If you’re traveling under 5 hours by road the bus is ideal.  The door to door time is often better than traveling by plane.

While they are often regional, the largest bus companies in the U.S. are:

2. Drive

Driving is often cheaper than a flight.  If your loved one lives within a few hours consider driving.  The gas, food and mileage on the car will be about the cost of a bus ticket.

If you don’t have access to a car for the trip borrow a friend’s car.  Friends often ask how they can provide help.  This is an area where they can lend a hand.

Having a car also gives you flexibility.  When you’re caring for a loved one sometimes a brief trip to take a swim at the gym, running an errand by yourself or visiting an old friend can make a big difference.

3. Membership Rewards

If you consistently travel every week or month use the same company to build up membership points.  Over a year you can get several free flights or trips.

Use a travel rewards credit card or debit card.  I own a Capital One Venture Card.  It’s incredibly simple to use.  I regularly get back $50 – $100 a month in cash.

Build a routine with a travel company.  Find a flight time or bus departure time that works for you.  Find your local sandwich spots nearby.  Get there early and rest.  Enjoy the new control that you have.

4. Rent Your Place On AirBNB

Long-term consider renting your place on AirBNB while you travel.  This is a highly personal decision but if you feel comfortable you can cover 100% of your travel costs.

I rent my place on AirBNB and it provides an additional $1,000 – $2,000 of income a month.  This covers a large portion of my travels costs.

Speak with a friend who rents their place on AirBNB and ask them how it’s going.  The process is a lot easier than you think.  People wrecking your place or stealing your stuff is extremely rare (it’s never happened to me personally).

This can enable you to travel more often, get that upgrade on your next flight or allow you take a much needed vacation.

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