Family Values vs. Estate Values
Life insurance can help wealthy boomers leave a value-based legacy to their heirs.
Baby boomers’ outlook on the future economic health of our nation is gloomy—62 percent are dissatisfied with the next generation’s prospects to have a better life than they did.1 This statistic isn’t shocking given that the average U.S. family lost nearly 40 percent of its wealth during the Great Recession of 2007 to 2010.2 As the U.S. 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, but 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.
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 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 vision of how they want to be remembered. 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:
1) 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.
2) 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 percent between 1982 and 2009.4 Ensuring that the next generation has the funds to help pay for a college education can be a very important consideration for some clients.
3) What values do you want to leave to your children or grandchildren? Many high-net-worth baby boomers want to ensure that 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, a faith-based organization or 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.
“Today’s wealthy boomers want to provide financial security for their children and grandchildren, but also want to be remembered for more than just the money they leave behind.”