The general media brims with stories on boomers waiting to receive an inheritance, but news is pretty scant about boomers planning to leave an inheritance.
This puts financial advisors in a bind. On the one hand, they want to help boomers develop incomes plan for the 20+ years boomers could spend in retirement. On the other hand, they want to nudge boomers to start planning to leave a legacy, financial and otherwise, so their heirs are provided for. The first is getting easier to do, but not always the second.
This tension shows up in surveys. For instance, only 1 in 3 American workers expect to pass retirement savings on to family members, according to the AXA Equitable Retirement Scope, a survey of 6,900 people in 11 countries published by AXA Equitable, New York.
Meanwhile, the remaining 64% of surveyed Americans believe they’ll spend all their savings during retirement, the survey found.
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Christopher Lubbers, president of Heartland Financial Group of Kansas Inc., Parsons, Kan., sees a similar divide. The boomers he encounters tend to be split 50/50 on this issue, he says.
About half have a view that he characterizes as being “all-for-me, spend-it-now, and I’m-counting-on-my-parents-to-leave-me-some-money.” The other half want to “pass-it-on, work-for-accumulation, and leave-it-to-my-kids.”
Not planning to leave an inheritance does not necessarily reflect greed or even disregard for descendents, points out Ken Gelman, vice president and director of market research for AXA.
Rather, he says in a statement accompanying the AXA survey results, it can reveal “insecurity about their ability to simply provide for themselves, let alone their heirs, in retirement, given uncertainty about Social Security and pensions.”
Other environmental factors are at work, too, note advisors. “Boomers are the first generation in history that, de facto, won’t be better off than their parents,” explains Cory Grant, managing partner at Westhem Grant Group LLC, Solana Beach, Calif.
Many boomers are dealing with parents who are still alive and also with adult kids who, in their 20s and 30s, are coming back home to live or who need money from their parents for a down payment on a house, he explains.
Some of the gifts boomers make to their adult children have been planned for some time, he allows. However, in other cases, “it’s not what they planned,” with the result that “the boomer can’t focus on leaving an inheritance right now.”
The question for advisors is, what to do about nudging boomers to start planning their estates? Or, should they do nothing at all?
“Our calling is actually an opportunity to intersect with other people and get them to think past themselves,” says Paul Funkhouser, an advisor with Gateway Financial Resources, O’Fallon, Ill.
“The advisor needs to help the boomer move from a focus on the accumulation of wealth to preservation and passing on,” he says. “We have to train the boomers.”
The window of opportunity will occur, he predicts, if the advisor cultivates the soil. The cultivation entails educating the client on legacy issues, helping the boomers identify their values and what is most important in their lives, asking what is important about the family, etc.
A good time to raise the topic is when the boomer has achieved some professional success and has some wealth as a result, Funkhouser adds. Specifically, “talk with the boomers about the money they have received and how they can pass that on.”
Turn the discussion towards how to be stewards of the assets, he suggests, and remind the boomer that “you don’t take them [the assets] with you” upon death.
If this conversation doesn’t happen, he contends, “you don’t have an estate planning client.”
Lubbers points out that it takes time to sort out into which category a boomer client may fall: the all-for-me category or the pass-it-on category. After he does that, he decides which direction to go.
His approach: Have a casual conversation with the boomer. Ask about finances, what’s important to the person, what he or she is trying to accomplish, the family situation, etc.
“Some boomers will flat out say whether they intend to leave anything to their kids,” Lubbers says.