If you've been reading our earlier blogs or our Saturday AM Review, this blog may sound a little bit like a broken record. One reason I keep coming back to this topic, Generational Wealth Planning, is because the tax treatment of generational transfers will “sunset” in 2025 and revert to the pre-2018 levels as specified in the Tax Cuts and Jobs Act of 2017, roughly a fifty percent ($12 million per couple) reduction in tax-free transfers taxed at 40%. The other “big” reason is the idea that planning for the future, in light of recent economic and legislative developments, is requiring much more thought and adaptation in arranging financial planning priorities.
Every family, regardless of the amount of wealth or annual cash flow, has opportunities to affect the future well-being of their children and grandchildren in ways that will provide security and peace in an ever-changing world. This type of planning has risen in priority as families consider the future of the world in which our kids and grandkids will live.
While global banking and financial crises may come and go, when governmental agencies and administrations appear to be expanding the magnitude of the problem instead of providing solutions to regain stability, the potential problems and responses to those problems suggest a review of long-term planning strategies.
As I mentioned in our blog article on 3/18/2023, Another Bank Bailout! It Looks Like Déjà Vu All Over Again, (one day before the announcement of the Silicon Valley Bank failure) the banking sector is getting shaky once again. I read this week that First Republic Bank needs to sell $100 Billion in assets to lend support to its financial solvency. As of today’s writing, it looks like there are no takers and we may see the “takeover” of the bank by the FDIC on Monday, May 1. Elon Musk last week made the comment about the world banking system that if all bank assets (worldwide) were valued “mark-to-market” (fair market value) that all banks would probably be “underwater”.
All this presaged a transfer of wealth from working and retired U.S. taxpayers to whomever it was that benefited from these frivolous and unsafe bank lending and management practices, similar to the ‘08-’09 financial crisis. Think redistribution disguised as “bank failure”. The U.S. taxpayer is the one left holding the bill on all this misappropriation activity. The U.S. banking industry has been the government’s piggy bank for much of its “back-door” agenda through agencies (as opposed to legislation) in collusion with big bank leadership since the repeal of the Glass-Steagall Act in 1999. Glass-Steagall was the law passed in 1933 to prevent another “Great Depression” banking crisis. Its repeal opened the door for future (and the present) banking crises.
This change in financial environment factors requires anticipation of the probable outcomes and consideration of steps to offset their potentially harmful effects. Long-term planning has never been more important. Managing financial resources and creating opportunities to provide and protect our families (kids, grandkids and beyond) from these changes, considering the times, has risen to a higher level of importance.
There are a number of tools available to address these future challenges. It is important that you are aware of these changes and meet with your financial advisor to discuss the alternatives you might want to consider. It is our job to make you aware of the changes in financial dynamics and to provide alternatives for addressing these changes. As always, we would be glad to help you analyze your personal situation.