The vast wealth that the baby boomer generation has amassed brings a new lens to the importance of planning ahead for the transfer of wealth for many American families. An estimated $124 trillion* is set to change hands to the next generation by 2048. This transition has already started, as the oldest baby boomers are nearly 80 years old.
Boomers have accumulated this vast wealth due to real estate ownership and participation in robust equity markets over time. With more families tasked with planning for their family’s legacy, RBC Wealth Management sought to explore the mindset of those who will be giving (givers) and those who will be receiving (receivers) an inheritance.
RBC Wealth Management recently surveyed 1,500 people with at least $1 million in investable assets, and this article will touch on some of the findings, stats and other aspects of transferring wealth.
Engage the next generation
An overwhelming majority of all generations agree it’s important to talk about an inheritance with those who will receive it (89% boomers, 98% Gen X, 97% millennials). However, only 39% of givers have already provided direction to their beneficiaries. Additionally, only half of givers (51%) feel very prepared to leave an inheritance and only half of receivers (54%) feel very prepared to receive an inheritance.
The time to have the family inheritance talk is now, not when it’s time for heirlooms and assets to be passed down.
Create a lasting legacy for your family
Address family legacy planning with a thoughtful approach, helping to teach the next generation about your wealth purpose and how you envision the wealth living on for generations.
Use this list of conversation starters
- What impact do you want your family legacy to have?
- What values do you hope to leave to future generations?
- How would you like to see this wealth impact your lives and the lives of your children?
- What is your ideal giving plan?
Incorporating a charitable giving strategy into an overall wealth plan can help develop a strong legacy for the entire family. Your financial advisor can guide you through the gifting and philanthropic solutions available to your family.
Many families appreciate doing the gifting while they are still alive, so they can witness the impact they are making. But it’s an important legacy decision as well.
A few common gifting examples
- Gifting for your child’s education and/or first house
- Starting a college fund for grandchildren
- Providing meaningful philanthropic gifts to an important cause
Research tells us that being generous and spending money on others makes us happier and brings purpose to our wealth. It also has the added benefit of showing the next generation generosity in action.
Leave a legacy of financial confidence, values and harmony
Family harmony is one of the most important aspects of leaving a legacy across all generations (54% boomers, 46% Gen X, 53% millennials); however, chaos, confusion and missteps could occur in the absence of wealth transfer conversations.
Survey key findings
Givers
- 94% of givers say their financial values are rooted in their family values, yet only 52% of givers have had conversations about their values with their intended beneficiaries
- 17% of givers say their heirs are very well informed
- 64% of financial advisors say their clients/givers fear their children are not prepared to inherit wealth
- 71% of givers who have had conversations about their values with their intended beneficiaries feel very prepared to leave an inheritance1
Receivers
- Most receivers say an inheritance would allow them to plan for their long-term financial goals (95% Gen X, 87% millennials)
- A majority of receivers say an inheritance would allow them to start thinking about their own legacy (89% Gen X, 82% millennials)
- Receivers also say an inheritance would allow them to spend more time with family (86% Gen X, 80% millennials)
- Overwhelmingly, receivers want to respect the wishes of those leaving them an inheritance (99%)
- Receivers agree they will treat the money they inherit differently than the money they earn (94%) and anticipate investing rather than spending their inheritance (93%)
To help achieve family harmony and bridge any gaps in understanding for givers and receivers, plan your conversations and seek support from your financial advisor.
Did you know that 64% of financial advisors say their clients are uncomfortable sharing financial information with their children*? This is where an RBC Wealth Management financial advisor can come in and bring the generations together.
New Investor's Nook: What would an inheritance mean for you?
Many millennials and Gen Xers stand to inherit family wealth in the near future from their aging baby boomer parents.
An inheritance could represent a chance to rewrite your financial narrative or offer a sense of security and freedom.
What might an inheritance allow you to do?
Here are top results from a recent RBC Wealth Management survey2 asking that question of young adults:
- 90% – Focus on long-term financial goals
- 86% – Explore the world/travel
- 85% – Start thinking about their own legacy
- 80% – Spend more time with family
Regardless of your answer, planning and communication are key tips for any transfer of wealth.