Some boomers aren't waiting to die to pass on their wealth — their millennial kids need it now

• Boomers are gifting wealth earlier to their millennial kids, two financial planners told BI.
• The proactive inheritances come as millennials have more debt and struggle to buy homes.
• Financial planners say transferring wealth earlier can make it more useful to the recipients.

Sophia Bera Daigle, the founder and principal financial planner at Gen Y Planning, said one of her clients, a doctor, has been gifted $10,000 a year from his parents for the past few years.

Recently, the client's parents told him they were going to up that amount — to $60,000 a year for the next 10 years — but that would be it.

"'We would rather give it to you and your two siblings while you have kids at home and need to pay for college and all of these things, but then don't expect any inheritance,'" Daigle said the parents basically told her client.

Daigle said she's seeing more and more of her millennial clients getting chunks of money from their parents as a kind of proactive inheritance, with boomers passing on their wealth well before they expect to die.

The earlier wealth transfer can take different forms: monthly or yearly cash gifts, paying for grandkids to go to private school, or, perhaps most commonly, a large sum for a down payment on a home.

It's a growing trend in what's been called the largest transfer of wealth in history, as aging boomers pass on trillions of dollars worth of assets to their children. Boomers waiting to pass down their wealth until their kids are much older has partially contributed to the rise in geriatric millionaires, BI previously reported.

But by passing on their wealth earlier, some boomer parents are providing an economic boost exactly when their kids actually need it — in their 30s and 40s when they're trying to buy a home and raise their kids.

Daigle said before she focused on working with millennials, she had clients who got money from their parents at an older age.

"When you have these baby boomers that were given inheritances when their 93-year-old mom was passing away, and they were 65, it wasn't that helpful," she said. "It was great, but they had already done things that they needed to get their own retirement place."

Millennials, in particular, could use the help. As Business Insider has previously reported, they have "more debt and a lower net worth than their parents had at the same life stage."

Gideon Drucker, president and financial planner at Drucker Wealth, said he is also seeing more older people proactively passing down their wealth. He tends to work with clients in their 30s and 40s, while his dad, who leads their senior division, works with those clients' parents, figuratively and, in some cases, literally.

There's a litmus test: If an older person planned their finances well, is financially independent, has enough income to support their needs and is not in danger of running out, and wants to pass down money to their kids, then it can be a good idea to do it sooner rather than later.

"We consider inheritances and money from families a gift of love," he said. "If your intention is to give that money to family as an inheritance, you probably want that money put to best use for the maximum amount of time that creates the most peace of mind for everybody involved."

The max amount that can be gifted each year tax-free is $18,000 for an individual or $36,000 for a couple.

Drucker said he thinks he's seeing this wealth transfer happen more often in part because the current estate tax exemption put in place by the Tax Cuts and Jobs Act of 2017 is set to expire at the end of 2025.

The federal estate tax currently ranges from 18% to 40% and kicks in for assets passed on that are above $13.61 million. That threshold could be cut in half in 2026, meaning the estate tax would apply to more families.

Although the vast majority of people are not impacted by the estate tax, Drucker said hearing about the exemption expiring has inspired some people to start thinking more about the best way to pass on their wealth.

One thing Drucker cautions against is giving your kids money in a way that might up their standard of living to a level they can't actually sustain. For instance, if parents help with a down payment that allows the recipients to buy a house and live in a neighborhood that they may not actually be able to afford in the long run.

He said gift recipients should use the money to better plan their finances rather than radically upscaling their standard of living.

Drucker and Daigle both said that if parents determine they are financially secure and able to help their adult children financially, then it should start with a conversation about what that might look like and what would be best for everyone.

"It all starts with the parents or the older family members really knowing enough about their own financial situation, having clarity around their spending needs, their income, their assets, to then be able to decide 'what's the purpose of all this money? What do I want to do?'" Drucker said, adding, "It all starts with that conversation."

Are you a boomer who has an opinion about passing along wealth to offspring, or a millennial who is the recipient of earlier parental help? Contact this reporter at kvlamis@businessinsider.com.