The Great Wealth Transfer – Myth or Reality?

Elizabeth Youmans - Director of Operations

The Great Wealth Transfer – Myth or Reality?

It’s widely estimated that a $30 trillion wealth transfer is poised to occur as baby boomers, history’s richest generation, prepares to bequeath their assets to their heirs. But, how is what’s dubbed as “the great wealth transfer” actually going to play out?

Baby boomers are healthy, wealthy, educated and have time on their hands. Boomers’ active lifestyles both before and during retirement translates to their discretionary income freely spent on everything from meals and entertainment to home improvements and new cars. Then there is travel. According to an AARP 2018 Travel Trends survey, Boomers expect to take 4 or 5 leisure trips in 2018 alone. So, baby boomers are the richest generation and are rightfully enjoying longer and more fulfilling lives as they age. Surely there will be something left over for future generations, right? It’s only natural to want to leave something to their heirs, isn’t it? Millennials sure think so. According to a Natixis U.S. Investor Survey, 70% of Millennials expect to get an inheritance, even banking on it when planning for their financial future. Yet, this same study shows that only 40% of their parents actually plan to leave one. Furthermore, inheritances that are given can often be smaller than their heirs expect. Many boomers are planning to leave at least some part of their wealth to charitable causes. Along with increases in life span comes the opportunity for a larger and growing family, i.e., more of the pie to share. As boomers become grandparents and great grandparents, they may wish to spread their wealth accordingly to 3rd and 4th generations in addition to just their children.

For the very wealthy, the issue of inheritance has its own set of challenges. According to the Williams Group, 70% of wealthy families lose their wealth by the second generation and a staggering 90% is lost by the third generation. It’s no wonder that the likes of billionaires such as Warren Buffet, Bill Gates and Mark Zuckerberg have publicly announced that the majority of their wealth will be given to charity rather than solely passed onto their families.

Whether or not you expect to leave something to your heirs, it is important to communicate openly and often. Importance should be placed on minimizing the disconnect between what one party expects to give and what the other party expects to receive. Include family members in financial planning and wealth transfer conversations and invite them to meetings with your financial advisor. While this may be uncomfortable for some, it will significantly minimize tensions that could alternatively be created with little or no communication. Create a unified family Mission Statement to document the legacy you wish to leave. Ensure wills, power of attorneys and other important legal documentation are reviewed and updated periodically. Engage younger family members in their own finances so that they become mature, educated and responsible with money early on. These are just some strategies to ensure issues related to wealth transfer can be minimized.

Clear Rock Advisors is clear in our mission of managing wealth for generations. In addition to being stewards of our own families’ personal wealth, we extend to all clients, as part of our service fee, integrated financial plans and solutions to help ensure not only your current and future financial success but also a successful transition of your wealth and its continued growth in the hands of future generations.

Elizabeth Youmans
Director of Operations