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Industry Spotlight > Women in Wealth

Adding Values to the Boomer Estate Plan

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Baby boomers’ outlook on the future economic health of our nation is gloomy — 62% are dissatisfied with the next generation’s prospects to have a better life than they did.1 This statistic isn’t shocking, given the average U.S. family lost nearly 40% of its wealth during the Great Recession of 2007 to 2010.2 As the United States continues its sluggish recovery, high net-worth boomers are concerned about the long-term impact of federal debt, increasing taxes and global economic instability on their efforts to preserve their wealth.3

These difficult times have left many high net-worth baby boomers feeling nostalgic and protective about their wealth. They earned their fortunes through hard work and built their character and values along with their wealth. Looking ahead, they want to help provide financial security for their children and grandchildren. Yet, they don’t want to simply hand over the keys to a generation that has grown to feel “entitled” to their family’s money or isn’t ready to manage it. However, as traditional long-term safety nets, such as Social Security and Medicare, begin to disappear, the impetus to put some type of security plan into place for the next generation grows stronger.

See also: Boomers Aren’t Interested in Leaving Money to Heirs

The need for a plan goes beyond simple wealth preservation, transference and tax protection. Today’s wealthy boomers want to provide financial security for their children and grandchildren, but they also want to be remembered for more than just the money they leave behind.

Incorporating family values into the wealth transference plan

Understanding a client’s goals and values is the core of legacy planning. For many clients, it’s about providing a safety net for their children or grandchildren. For others, charitable giving is a key element to their legacy vision. In this planning approach, the traditional discussion surrounding estate taxes is not forgotten or ignored, but the process is expanded to include more personal values and visions. Here are three key questions to ask when getting started:  

What does wealth mean to you? Each client’s personal definition of wealth will differ. However, for the majority, wealth represents security — and provides freedom from want. It allows individuals to help future generations without jeopardizing their own financial security.

What kind of life do you want for your children or grandchildren? More and more work opportunities require some sort of higher education or special training. In providing resources for the success of future generations, there is a deep concern over the rising cost of college tuition, which skyrocketed 439% between 1982 and 2009.4 Ensuring the next generation has the funds to help pay for a college education can be a very important consideration for some clients.

What values do you want to leave to your children or grandchildren? Many high net-worth baby boomers want to ensure the money they provide to future generations comes with a sense of social responsibility. This might include pursuing a career or involvement with a nonprofit, in an educational field, at a faith-based organization, or with an environmental agency. Others may hold entrepreneurial values and want the next generation to feel encouraged to pursue a dream of starting their own business.

Providing financial security that will last

Once you know the client’s goals and dreams, you will have a foundation upon which to help them build a legacy plan. You can help clients structure a disbursement of funds over time with guidelines on how they would like their children and grandchildren to use the money they are leaving behind. By structuring payments, they can help protect their children and grandchildren from mismanaging their inherited wealth. A recent study showed 70% of people who receive an inheritance will spend it in its entirety, with 80% doing so within two years.5 Life insurance can be a great solution as it provides the guarantees, flexibility and control clients want and need. For example, you might recommend:

(a)  A trust account that can be used to control the disbursement of funds to the heirs. Funding a trust has never been so easy or economical. Through the end of 2012, taxpayers may make a gift to a trust of up to $5.12 million on a federal gift tax-free basis. This is a great time for clients to take advantage of significant wealth transfer opportunities that may never again be this high. A life insurance policy can be a smart solution for funding a trust fund.

(b)  A life insurance policy with a structured income payout option, in which the death benefit can be distributed over time through a monthly income stream without trustee oversight. Lump-sum payouts can also be designated at specific times to cover immediate or projected expenses, such as future funds for a grandchild’s college education.

Whatever method is chosen to administer the legacy plan, it’s important for your clients to clearly communicate with their heirs about the intentions and structure behind the plan. This is not always easy or pleasant, but it can be critical in avoiding future family tensions and misunderstandings, including, in some cases, an attempt by the heirs to overturn or change the wishes of the deceased.

Providing a valuable service through value-based planning

The old estate planning strategy of focusing on the tax bill is no longer as relevant to high net-worth baby boomers. Knowing how to develop a plan to pass along personal values, provide controlled financial support where necessary, and perhaps also incorporate charitable giving can create a more impactful way to connect with clients. Industry leaders and advisors recognize that the number of prospects with an interest in legacy planning is definitely increasing. With the baby boomer group controlling a large portion of the wealth and representing the largest demographic segment of the population, the opportunities to help clients provide meaningful financial security to their loved ones are endless.

1. Gallup Poll, June 4, 2012, “Majority in U.S. Dissatisfied with Next Generation’s Prospects”

2. Los Angeles Times, June 11, 2012, “Average U.S. family’s wealth plunged 40% in recession, Fed says”

3. The High Net Worth Investor Study, April 26, 2012, conducted for Schwab Advisor Services by Koski Research

4. Money, April 13, 2009, “Is college still worth the price?”

5., July 11, 2011, “Promotion of Family Values Through a Trust”

For more on estate planning, see:

Boomers Aren’t Interested in Leaving Money to Heirs

Today’s Opportunities in Estate Planning

Blood & Money: Why Families Fight Over Inheritance