A significant tax incentive is set to expire in 2025, leading many affluent parents to hurry in transferring their assets to their children as Kamala Harris gains ground in the polls ahead of the 2024 presidential election. However, this rush has raised concerns about the emotional impact of sudden wealth on children, a phenomenon known as “sudden wealth syndrome.”
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What’s Happening?
Currently, individuals can transfer up to $13.61 million tax-free to family members, while couples can transfer up to $27.22 million. But this generous tax benefit is set to expire at the end of 2025, with the amount likely decreasing by about half. This change has prompted ultra-wealthy families to take quick action, transferring large sums of money to their children before the deadline.
Wealthy parents feel pressured to provide financial security for their children as soon as possible due to Harris advocating for higher taxes on the wealthy. They are worried that potential tax law changes under a Democratic president may be less favorable for them.
While their focus is on securing their children’s financial future, they are also concerned about the potential impact of receiving a large sum of money suddenly on their children’s well-being.
The Risks of Sudden Wealth
Sudden wealth syndrome poses a real challenge for individuals who come into a significant amount of money unexpectedly. Children inheriting substantial sums or receiving unexpected wealth may face overwhelming anxiety and uncertainty about managing their newfound wealth.
Wealth advisors are advising families to carefully consider these transfers, not only for the tax benefits but also for the potential impact on their children’s mental health and future.
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What’s At Stake?
According to a report, “Much is often made in the media of millennial and Generation Z heirs, but Generation X will be first in line to inherit from their wealthy parent(s).”
The report also states that over the next 10 years, approximately 1.2 million individuals with a net worth of $5 million or more will pass down over $31 trillion. Nearly two-thirds of this wealth will come from the ultra-rich, those with a net worth of $30 million or more. Ultimately, around $20 trillion will be inherited from just 155,000 of the wealthiest individuals.
Educating kids about financial responsibility before they inherit a fortune can help them feel more comfortable managing their wealth. Some families are implementing gradual inheritance plans to ensure their children do not receive all the money at once, while others are seeking professional guidance to assist their children through this significant life change.
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This article Kids Facing ‘Sudden Wealth Syndrome’ As Harris’ Rise Has Parents Worried, Racing To Transfer Billions To Kids Before A 2025 Benefit Expires was originally published on Benzinga.com
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