Over the next 20 years, the largest transfer of money in U.S. history will occur, with more than $70 trillion expected to pass from baby boomers to their millennial children.1 This great wealth transfer will make millennials the richest generation in American history.2
Transferring and preserving assets is a big task that requires awareness and cooperation from everyone involved—yet many baby boomers and their millennial kids aren’t talking about it. Some boomers are reluctant to give up control or are concerned their kids are unprepared to handle the money. Others are concerned they won’t have much to leave because of a potential recession. Still others simply feel uncomfortable talking to their children about finances.
Talking about money can be difficult, but avoiding these important conversations can come at a cost. For example, if a millennial is banking on an inheritance that won’t come, they may need to save more for retirement. Or if a boomer plans to pay for their grandchild’s college education, their millennial child may not need to contribute to a 529 plan. And finally, not communicating plans and expectations can lead to feuds among siblings and heirs.
If you’re a baby boomer who’s planning for retirement and thinking about how you’ll distribute your wealth to your children, here are seven tips to help you have these important conversations.
1. Share basic information.
The easiest way to get the conversation going is to share the basics, such as firms you use for bank accounts, retirement accounts, brokerage accounts and insurance policies. Create a document that details your financial assets and entitlements, with enough information that your kids can claim them.
2. Talk about your values.
You’ve worked hard to accumulate your estate, and you may a vision of what you want your assets to accomplish. Whether it’s charity, self-sufficiency, education or something else, it’s important to share your financial values with your kids.
3. Explain your actions.
Many people treat their children equally when it comes to inheritance, yet there are some situations that could call for an unequal inheritance. For example, if you have a special needs child, or you have already financially helped a child, an unequal distribution may be appropriate. Sitting down and explaining your rationale is important in staving off misunderstandings and turmoil.
4. Communicate “surprising” decisions.
Do you plan on doing something with your money that could surprise your adult children? Whether it’s an expected heir or dedicating some of your assets to a charity, it’s important to share these decisions with your kids sooner than later.
5. Make introductions between your financial advisor and kids.
At the very least, your children need to know how to contact your financial advisor if you’re not around. However, it could be beneficial for all if your children develop a relationship of their own with your advisor.
6. Give kids a general inheritance range.
Are you ready to start the conversation about how much inheritance your adult kids could receive? You don’t need to provide an exact number. Some experts recommend sharing a range that provides a sense of scale, or suggesting what the inheritance could cover (such as a home purchase).
7. Keep the conversation going.
This isn’t a one-and-done conversation. Your financial picture could shift over time and impact the inheritance your children will receive. For example, health care and long-term care costs could impact your estate’s value. Communicating major changes sets expectations and helps your kids in their own financial planning.
Bankers Life Securities is here for you and your family!
Implementing your estate plan can be complex, but you don’t need to face it alone. Through our wealth management solutions, Bankers Life investment professionals are ready to help you and your kids make the most of the estate you’ve worked so hard to earn.
1The Washington Post, Boomers, Talk to Your Kids About Their Inheritance, https://www.washingtonpost.com/business/boomers-talk-to-your-kids-about-their-inheritance/2023/01/26/3ed903ac-9d83-11ed-93e0-38551e88239c_story.html, January 2023.
2Forbes, The Great Wealth Transfer From Baby boomers to Millennials Will Impact The Job Market and Economy, https://www.forbes.com/sites/jackkelly/2023/08/09/the-great-wealth-transfer-from-baby-boomers-to-millennials-will-impact-the-job-market-and-economy/?sh=9ba6c843e4aa, August 2023.