The Most Important Talk You’ll Have with Your Family

Baby boomers are the wealthiest generation in American history.

And over the next three decades they’re expected to transfer $30 trillion in cash, stocks, bonds, real estate, and other assets to Gen X’ers and millennials.

However, this Great Wealth Transfer has hardly started and is already running into four giant generational disconnects…

Disconnect #1

A survey by U.S. Trust found that 82% of millennials think it’s important to leave an inheritance, compared with 57% of baby boomers.

Disconnect #2

70% of young people expect to get an inheritance while only 40% of parents plan to leave one.

Disconnect #3

68% of millennials are confident they would be responsible with a financial windfall. But just 42% of boomers think their children could handle the responsibility of inherited wealth.

Disconnect #4

Another study, this one by Allianz, analyzed the finances and habits of boomers, millennials, Gen Xers.

Here’s what they found:

  • 65% of boomers see saving for retirement as a basic necessity like food or housing. Only 58% of millennials and 53% of Gen Xers have the same outlook.
  • Median retirement savings for boomers is $175,000; $35,000 for the other two generations.
  • 72% of boomers and 74% of millennials feel financially prepared for retirement vs. 63% of Gen Xers.
  • 6% of boomers consider themselves spenders rather than savers vs. 63% of millennials and 51% of Gen Xers.
  • 64% of boomers say they’re a saver vs. a spender. Whereas 49% of Gen Xers and only 37% of millennials make such a claim.
  • 16% of boomers spend more on going out than on rent or mortgage payments vs. 50% of millenials and 29% of Gen Xers.
  • Gen Xers and millennials haven’t been as proactive as boomers in getting ahead and feel powerless to change their financial destiny; 63% of Gen Xers think everything will just work out.

Obviously, these are just statistics.

There are responsible, money-minded people in every generation. And there are also spendthrifts born year in and year out.

But if you’re concerned that future heirs might not be prepared to handle a large influx of wealth, it may be time to have financial literacy conversations starting now.

Many families are reluctant to talk about finances…

It could be because of wide age differences, varying degrees of financial knowledge, or other conflicts among members.

Maybe boomers can’t imagine growing old and dying.

Maybe the kids can’t imagine life without their parents.

Maybe numbers and concepts just seem too abstract or petty.

I say you need to get the ball rolling.

In fact, even if you don’t have any money to leave behind, it’s time to start talking finances with your family.

Letting them know where to find important papers, such as wills, health insurance cards, and investment account information is a good start.

Have candid conversations with your children about your estate plan, end of life care, durable power of attorney, health care surrogate, life expectancies, and trusts.

Everyone should understand who is getting what – if anything – and why.

If you are concerned that an inheritance could hinder a child’s work ethic, bring it up, although you might want to do so in private.

Also explain what’s important to you…

Make your intentions specific.

For instance, would you want to be kept alive by any measures available? Or should they pull the plug if there isn’t any reasonable chance you’ll recover?

There are other steps you can take so the money you’ve saved over a lifetime transfers smoothly…

First, make sure money will still be there…

Have you thought about what would happen if your health took a turn for the worse?

A few years of long-term care can bite a huge chuck out of many portfolios. Long-term care insurance is one option, although premiums can be hefty.

Take a walk around your home.

Is it senior friendly? If not, updating the bathroom, kitchen, and walkways might be a solution so you can age in place.

Second, tax implications…

Often heirs will take an IRA as a lump sum, pay the tax, and blow the money within a year.

Assuming that’s not what you’d want, bring up the tax implications with your kids. Explain why that is a poor choice for a generation who will likely not have a pension.

Then offer the alternate strategy of stretching the inheritance over their lifetimes.

Third, someone will have to take charge…

Name an executor or a trustee to distribute assets per your will and/or trust.

By letting everyone know your intentions beforehand, you’ll reduce the chance of a disappointed family member causing a delay.

There is no single solution, as every family’s situation is unique.

But there has never been a better time than right now to start talking about money with other family members.

To a richer life,

Nilus Mattive

Nilus Mattive
Editor, The Rich Life Roadmap

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