An estimated $100 trillion will pass from older to younger generations over the next two decades, affecting an increasing number of American families.
However, many families are not adequately preparing for this transition and are seeking guidance to facilitate conversations about money and family values, according to survey results released Thursday by RBC Wealth Management — U.S.
“A successful wealth transfer is about making sure beneficiaries understand what they may receive and how their inheritance can be used to carry on family values,” Angie O’Leary, the firm’s head of wealth strategies and solutions, said in a statement. “This is an opportunity to create a legacy that continues many generations into the future.”
The online survey was conducted in September among 1,500 Americans with at least $1 million in investable assets. Five hundred each were baby boomers, whom researchers called “givers” as they plan to leave an inheritance; and Gen Xers and millennials, whom they designated as “receivers” of bequests.
Importance of Wealth Conversations
Wealth transfer is not only about money, the survey finds, but also about family legacy and aligning priorities, passions and values with the next generation.
Boomers, Gen Xers and millennials all overwhelmingly agreed that family values are the foundation of their financial values and said it is important to discuss inheritances with intended recipients.
Yet, the survey showed that only 52% of givers have had conversations about values with their intended beneficiaries, and just 39% have provided guidelines for the wealth.
As a result, only 54% of receivers said they feel prepared to receive the $2.1 million, on average, that they expect to inherit.
The primary driver of feeling unprepared is a lack of communication, according to the survey. Seventy-one percent of givers who have shared their values with intended beneficiaries said they feel very prepared to leave an inheritance, compared with 51% of all givers. Still, 67% of givers admitted to putting off these conversations.
Delayed conversations also contribute to givers' perception that their heirs are not prepared to manage the wealth. Only a quarter of givers considered their beneficiaries very prepared for their inheritance.
In reality, the survey showed, 99% of receivers intend to respect their parents’ wishes for the wealth, and their top concern is being financially responsible with what they receive.
The survey found that about a tenth of givers have already begun to transfer wealth during their lifetime, and these were significantly more likely to have had conversations about values with their heirs.
Eighty-four percent of givers said that ensuring that their family is financially secure for generations is a top priority, but 75% of givers also said that they want to enjoy life now, even if this means passing on less money.
“When clients have a personalized retirement income plan and know they will be able to fund the life they envisioned for themselves, they are more open to starting the wealth transfer earlier,” O’Leary said. “And beginning to transfer wealth while living can be a powerful tool for starting the dialogue about values and preparing heirs.”
Advisors Can Facilitate Discussions
Sixty-five percent of givers and 94% of receivers said they would like professional help to facilitate family conversations about inheritance. They are looking for advice on investment strategies, tax minimization, maintaining assets and preparing the next generation.
The survey found that financial advisors are, by far, the primary resource that wealthy individuals across all generations consult to learn more about inheritances, more so than accountants, attorneys, friends and family, and online resources.
“These findings present a clear opportunity for financial advisors to be proactive in reaching out to clients to facilitate multigenerational wealth transfer conversations,” O’Leary said.
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