Families Still Need Inheritance Transfer Talks

July 27, 2005 (PLANSPONSOR.com) - Only a third of baby boomers and the elder generation (age 65 and older) have talked with their families about inheritance and related financial planning issues, according to a new survey.

A news release said the Allianz American Legacies Study found that the Elders (22%) are more likely than boomers (3%) to believe they owe their children an inheritance. Nearly 40% of the elder generation said it is very important to pass financial assets or real estate to their children, but only 10% of baby boomers feel the same. Allianz said about $25 trillion in wealth is to be handed down by the elder generation to their heirs, $7.2 trillion of which will go to the boomers.

The study also revealed that the majority of the nation’s baby boomers (68%) and those from their parents’ generation (71%) say they feel highly confident discussing key elements of inheritance and legacy planning issues.

“Many families are not getting to the heart of the real issues,” said Mark Zesbaugh, CEO of Allianz Life, in the news release “If the conversation does not cover the four pillars people consider core to a true legacy – values and life lessons, instructions and wishes to be fulfilled, personal possessions of emotional value, and financial assets/real estate – the legacy conversation between the parent and the boomer child doesn’t happen in a meaningful or effective way.

According to the study, both boomers and those in the elder generation were uncomfortable discussing leaving an “inheritance” but both enthusiastically embraced the idea of leaving a “legacy,” because it captures all facets of an individual’s life – including their family traditions and history, sharing stories, values and wishes.

Passing along “values and life lessons” is overwhelmingly considered (by over 75%) the most important element of a legacy for both generations.

The ‘Turn to’ Child

An Alpha Child – defined in the study as “the child parents turn to first” – typically guides legacy planning. The profile of the Alpha Child is one who keeps the family connected and is a strong communicator. Some 40% with more than one child say they have an Alpha Child. Almost 50% of the boomers who are Alpha Children say it is their responsibility to initiate legacy discussions with their parents and 77% say they are comfortable in discussing legacy issues.

Performance-based distribution gives more to the child that has cared for the parent and less to the children that were a source of stress and conflict. This distribution plan is particularly favored by individuals with a high net worth. Some 71% of elders with a lower net worth felt that distribution should be equal; whereas, 54% of their higher net worth counterparts felt the same.

The telephone survey was conducted between April 21 and May 2, 2005 among 2,004 US adults, of whom 1,004 were baby boomers (age 40-59) and 1,000 were of the elder generation (age 65 and over). The online survey was conducted in the United States between April 22 and 27, 2005 among an over-sample of 278 baby boomers (age 40 to 59) and 345 elders (age 65 and over) who both have a net worth of over $250,000. On June 24th and 25th, Harris Interactive conducted 200 additional telephone interviews with a random selection of the original 2,004 telephone respondents. Some 100 additional interviews were conducted with adults aged 40-59, an additional 100 additional interviews were conducted with adults aged 65+.

More about the study is here .