It seems there’s a shifting tide in the way wealthy Americans feel about transferring their financial wealth to their children. And the kids may not be ok with this.
While many financially wealthy parents do plan to leave a tidy financial inheritance to their children and / or grandchildren, there is also a clear, growing trend that “the kids need to work hard and make their own money.”
It used to be that parents felt obliged to leave their financial assets to their children, as well as their values. In fact, many of these parents sacrificed a great deal for their children and did not tend to “live it up” in their later years, to make sure they would indeed be able to leave a nice sum to their kids.
But many of the wealthy amongst the baby boomer generation have a much different attitude. They feel “I made it on my own; they can too.” In fact, they believe that their children might be harmed by being left a large inheritance. They believe that the children might best be prepared for life by being given solid values, a good education, and a more modest nest egg.
Maybe people are following the likes of Warren Buffet and Bill Gates: these super-rich guys plan to leave only a small fraction of their wealth to their children. A recent research study confirms this is indeed a trend. Conducted by U.S. Trust, the study found that less than half of wealthy parents thought it was important to leave their money to their kids.
The survey of 457 individuals, who each had $3 million or more in investable assets, concludes that more wealthy Americans want to spend their money on themselves while they can, then leave what’s left to charity, not just to their children.
Why?
Many of the survey respondents were baby boomers who sacrificed and struggled to make it on their own. Many built up successful businesses. But it also seems they are not all that confident that money they leave would do a great deal of good:
- 34% feel that their children would not be able to handle an inheritance
- 24% fear their kids would become lazy
- 20% believe their kids would make poor decisions
- 20% feel their kids would squander the money
- 13% believe their children would be taken advantage of by outsiders
There are many variations on the theme: some wealthy families will leave some assets to their children and the rest to charity, or perhaps leave a lot to their grandchildren and none to their kids. Of course, the use of trusts can also ameliorate some of the concerns expressed by those in the survey
However, there’s little doubt – as evidenced not only by the U.S. Trust survey but also from talking to estate planning and asset management firms across the U.S. – that many baby boomers have a much different take on transferring wealth as compared to previous generations.
What is your experience? Have you seen a shift in attitudes?
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com
- Dynasty Trusts - January 19, 2021
- Biden Administration Could Reduce Estate Tax Exclusion - January 12, 2021
- Starting the New Year Right - January 5, 2021
