Did you spend your entire life accumulating wealth just to leave it to the next generation, or do you plan to spend it all and have a good time while you are still living?
The same generation that redefined American culture is making changes to the concept of inheritance as well. A recent article in Forbes, "How Boomer Parents Feel About Leaving Inheritances," looked at two studies concerning inheritances to find that Baby Boomers are of two minds when it comes to leaving inheritances to their children. Some have no intention of leaving anything behind. They don't lack for generosity; they just have a different way to share. Others are planning on leaving assets to their offspring, but are not sure that their heirs will be able to manage an inheritance wisely.
The Hearts & Wallets report, Funding Life After Work: Impact of Parenthood & Wealth Transfer on Retirement Solutions for Baby Boomers, reveals that roughly 40% of those surveyed plan to leave inheritances. About 30% expect to spend all their money, and the other 30% aren't sure. There's one item that the majority of the parents had in common: they're afraid of running out of money. And those who plan to leave inheritances are extremely terrified of running out of money!
Interestingly, ultra-wealthy parents appear to be more apt to give their kids inheritances, according to a US Trust survey of high net worth individuals with at least $3 million in investable assets. Some 57% of the respondents think it's important to leave a financial inheritance to the next generation—which is somewhat less than the 66% of Gen X'ers and 74% of Millennials who felt this way. However, only 27% of the parents surveyed have told their children how much they are likely to inherit. One reason for this is that only 20% strongly agreed that their children will be prepared to handle the wealth they'll receive.
The wealthier boomer parents interviewed were also more apt to leave inheritances than ones with fewer assets.
Many boomer parents who won't leave inheritances aren't stingy with their cash—they're just giving their children and grandchildren money while they're still around to watch them use the cash to fulfill their dreams (and also watch to be sure it's used wisely). Some call this phenomenon "investing in their children while they are growing."
Those who do plan to leave inheritances see this generosity as "the ultimate insurance policy against ever running out of money" and earmark some of their assets for their children. They'll only tap in retirement for the amount they'll have beyond that. Yet these parents are afraid that they may have to tap into their principal one day.
Regardless of your position on inheritances, having an on-going conversation with heirs about your plan will be more instructive than making family members wait until the will is read to find out what you wanted, and why. If these conversations are difficult, consider including Robert A. Gordon of Redkey Gordon Law Corp, a trusted estate planning attorney in the family discussions.
Reference: Forbes (January 21, 2016) "How Boomer Parents Feel About Leaving Inheritances"