There’s a wide gap in understanding between baby boomers and their elderly parents about what to do with an estimated $7 trillion in total wealth the elder generation will hand down to boomer heirs, a study by Allianz Life Insurance Company finds.
The study also suggests financial advisors shouldn’t focus financial discussions too much on how elder clients should divvy up their assets, the top company executive says.
Among the specific “legacy gaps” or missing communications that the Allianz American Legacies Study found were that:
o Nearly 40% of the elder generation (aged 65 and up) said it is very important to pass financial assets or real estate on to their children, while only 10% of boomers (aged 40 to 59) thought that was very important.
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o Elders are 7 times more likely than boomers to believe they owe their children an inheritance (22% vs. 3%).
o 68% of boomers and 71% of elders agreed they can discuss confidently key elements of inheritance and legacy planning with the other. Yet less than a third of either actually have done so.
One thing boomers and their parents do agree on: Non-financial legacies, such as morality and religion, are 10 times more important than a financial legacy.
“Many people wrongly assume the most important issue among families is money and wealth transfer,” notes Ken Dychtwald, president of Age Wave Inc., San Francisco, a consulting firm that helped design the study.
For most, however, “legacy transfer has to do with deeper, more emotional issues,” he says.
Dychtwald believes financial advisors should talk to clients in terms of “legacy” rather than “inheritance” when raising the issue of financial planning. The latter term may carry off-putting connotations such as death for many, he says.
For the study, Allianz defined a legacy in terms of four pillars: values and life lessons, instructions and wishes elders want their children to fulfill, personal possessions, and financial assets and real estate.