Have you ever uttered this sentence?
“I am not going to make the same mistake my parents made.”
This is the guiding principle in the famous lesson which states that we need to learn from the errors of the past.
Reality can sometimes get in the way of those sorts of overreaching statements. But if points can be scored due to good intentions, then the plan to make better decisions than your predecessors is a wise one.
In Spectrem’s study Legacy 2.0: Baby Boomers and Inheritances, people born between 1946 and 1964 and who received at least $500,000 in an inheritance were asked questions about the entire experience of inheriting money, and how it might impact their own wealth transfer decisions.
Many aspects of the inheritance process are covered in the study, including whether the inheritance impacted the lifestyle of the inheritor, the physical details (liquid assets versus illiquid assets) of the inheritance, and the involvement of family members in the wealth transfer process.
Inheritors were asked to respond to the prompt “I feel there will be no disputes among my beneficiaries” and 63 percent of Baby Boomers agreed. That means 37 percent anticipated that there will be disputes among their beneficiaries when the time comes for the wealth transfer to take place.
Inheritors were asked to rate the inheritance process on a 100-point scale based on how smooth the transfer of assets went. While the overall rating was 71, which is a very positive rating, 21 percent rated the process at under 50. The fact is that despite all the possible planning of the grantor, wealth transfers related to the estate of a family member who has passed away do not always go smoothly.
There are a dozen reasons a wealth transfer can be bumpy, and many of the dispute can end up in court. But the Baby Boomers participating in the study certainly hope to help their beneficiaries avoid those conflicts.
Asked to respond to the statement “I plan to be more organized to make it easier for my beneficiaries”, only 50 percent of all inheritors agreed. That means half of the inheritors did not consider the difficulties that can occur in a wealth transfer as they planned their own portfolio distribution.
One of the more complicating issues in an inheritance is what to do with illiquid assets that can either be split among beneficiaries or sold into cash for easier distribution. However, only 16 percent of inheritors said they planned to liquidate many of their illiquid assets prior to their death.
©2019 Spectrem Group