Financial Wellness

Transferring Wealth

It's Just Not Something We Talk About

We've done the best we can to teach our children well — from table etiquette to values to the importance of family and community. Yet one area that we may not have mastered is preparing them as beneficiaries, or as recipients of a vast intergenerational wealth transfer.

The United States is on the cusp of the largest wealth transfer in the country's history: about $40 trillion will be handed down to the next generation by 2050. The oldest baby boomers are turning 75 in 2021 giving the Generation X population, the 66 million Americans born between 1965 and 1980, a huge responsibility to manage. And, these heirs may not have the relationships in place to manage this asset transfer.

It's a Delicate Subject

Most parents avoid discussing inheritance plans with their children. In fact, nearly half (46%) of benefactors had not done so in a UBS Wealth Management survey of more than 2,800 high-net-worth investors.

Why? Twenty-seven percent said they don't want their children to feel entitled to wealth. Thirty-two percent said they don't want their offspring to count on an inheritance.

These are valid concerns — ones that come standard when we discuss finances and estate planning. However, these concerns should serve as opportunities.

The authors of Executors, Trustees & Beneficiaries, Vic Preisser and Vanessa Terzian, make the point that while parents may devote hundreds of legal and accounting hours preparing their assets for transfer, they seldom spend the same amount of time preparing their heirs to receive and manage those same assets — the solid foundation for becoming good beneficiaries.

How to prepare your beneficiaries

Part of your responsibility is to progressively prepare your beneficiaries to assume their inheritance. Key success factors include education, communication and credibility.

Education

Experts believe that many families spend a lot of time earning and accumulating wealth, but not enough time preparing their kids for how to manage it later in life.

Supplying financial literacy tools is an effective way to work with the next generation. Most financial and investment institutions offer basic to advanced sessions — from discussing college finances to mortgages to estates and wills.

Including heirs on financial decisions is also useful — from saving to spending to donating. Conversations should focus on why each action is taken, and its pros and cons.

Communication

Traditionally, the emphasis on wealth transfer has been placed on the asset when just as much attention should be placed on establishing, maintaining, and communicating family financial values.

Wealth advisors encourage clients to discuss inheritance plans with their spouses and children — especially adult children. With age comes the risk for diminished cognitive capacity. It is important to share your plans, expectations and knowledge. Family meetings allow heirs to learn about your expectations.

Don't make the assumption that everyone knows how you want things to be handled. Work together to prepare a full and complete financial plan for the future should you be out of the picture. Emphasize how and where attention should be placed.

Credibility

Credibility must be passed on from generation to generation in the form of introductions.

We must allow our trusted relationships to expand and include our heirs. Introduce your children to those you trust and those institutions you have a relationship with.

Time and time again, we see heirs close accounts and request a check without knowing what to do with the money or where to deposit funds. It is especially disheartening to see beneficiaries close existing accounts not realizing they are eligible to retain or open new accounts with CEFCU.

Beneficiaries become frustrated because they don't have an existing relationship with CEFCU and do not have instructions on what to do. For many, they lack the relationship and experience. Simply, they haven't been given proper instructions or introductions to maintain a beneficial relationship with long-time trusted financial institutions.

It's no secret that Generation Xers transact business differently than Baby Boomers. They prefer to establish or challenge a relationship over email. They often invest in a brick-and-mortar-less organization via the web. They can easily sign off on a sizeable amount of funds without considerations to your preference simply because they don't know any better.

Share Your Relationship with Us

In turn, we as your trusted financial institution have a responsibility in this relationship, too. Be it as a joint account member or in many cases a power of attorney or beneficiary, we must provide the right educational portals, services and technology during necessary times to establish key relationships.

So far, we've done well. We have Financial Wellness, our online library of articles customized to educate our members. We have online technology to access accounts, open and fund a new account, apply for a consumer or real estate loan, move your funds to and from another financial institution, and deposit a check from your smartphone — all the services that have become expected these days.

And, of course, CEFCU has a rock solid reputation, undisputed security and stability, and provides a trusted relationship — one that you should share with your loved ones. We are here to help during difficult times or special circumstances. When confronted with these situations, you and your heirs will discover just how valuable this personal advantage is for your financial future.
 


 
Preisser, Vic, and Vanessa Terzian, Executors, Trustees & Beneficiaries. Pasadena: Institute for Preparing Heirs®, 2016.