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April 15, 2007 at 04:00 PM
A few years back, researchers at Boston College got a lot of press with a study predicting that the “largest intergenerational wealth transfer in history” will occur between now and 2052.
They projected $41 trillion would be transferred via estates over the next 50 years.
If that bonanza were spread evenly among the nation’s 76 million baby boomers, each lucky recipient could look forward to an inheritance of about $1 million. But the truth of the matter, according to a study published by the Federal Reserve Bank of Cleveland, is that only 1 in 5 families report ever receiving an inheritance. Most got less than $25,000, and just 1.6% reported receiving more than $100,000. (Source: Laurence Kotlikoff and Jagadeesh Gokhale, 2000, “The Baby Boomers’ Mega-Inheritance: Myth or Reality?” Federal Reserve Bank of Cleveland.)
There are a lot of reasons for this. For one, most of the inherited assets will stay put within wealthy families. Other factors: People are living longer and are more likely to deplete their savings. Studies also show the desire to leave an inheritance is declining. And for many, the sources of their wealth–Social Security, pensions and non-transferable investments–will die with them.
That being said, there are still a whole lot of Americans out there who would like to leave a little something to loved ones and charities. But many folks can’t justify hiring an expensive lawyer or estate planner, and they just don’t know how to do it on their own.
If an agent or advisor has a client over age 60, it’s a simple thing to ask if the person has $10,000 or more set aside in a bank account or CD that they plan to leave to a loved one or a favorite charity. If the answer is yes, it might be worth looking into a single premium life insurance solution.
Single premium life is not a traditional life insurance policy. It’s designed for older folks who are reasonably healthy, who have $10,000 or more that is not targeted for use during their lifetime, and who would like their beneficiaries to receive an inheritance that is income-tax free.
Let’s say the agent has a 60-year-old, nonsmoking female client who has $50,000 set aside for her children. Instead of letting that money sit in a bank account, she could purchase a single premium life policy.
