Issue 30: 2015

Family Wealth Services

Parents and Inheritance

A two-part primer for parents and their children.

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Click on the icons below to navigate between parents and millennials.

With an unprecedented transfer of wealth under way, many parents fret that the younger generation may not be ready for it. Here’s a look at how both generations might alleviate concerns and best prepare for the responsibility that comes along with wealth.

Memo to all high-net-worth parents: Millennials, the generation born between 1980 and 2000 and saddled — perhaps unfairly — with a reputation for staring at smartphones and returning to the nest in their 20s, stand to inherit $30 trillion during the next few decades.1 Understandably, many parents — maybe you included — are concerned that the next generation lacks the maturity or the financial know-how needed to handle any inheritance.

While that may be the case, do not despair. “There are practical steps you can take to remedy the situation,” says Craig W. Bethel, a wealth strategies advisor at U.S. Trust. “And, ultimately, your children may surprise you with a willingness to learn or they may show you that they possess a stronger financial acumen than you might have realized.”

PART ONE: PARENTS

Starting the conversation

As it happens, “a shift to more openness may already be under way,” says Bethel. “A rise in affluence-related news stories — contrasting economic conditions, wealth and social responsibility — may have prompted children to ask questions about family assets.” And millennials have a reputation for wanting answers.

 

If you haven’t had “the talk” about wealth, consider this: With Internet access, a teenager can uncover many facets of your financial information with just a few clicks — mortgages, home sales and corporate financial reports may all be publicly available. “Better to raise the topic and position it in a manner that is consistent with your family’s values than to have them use their imagination to fill in the blanks,” says Paul D. Stavig, a wealth strategies advisor at U.S. Trust. “A general, age-appropriate discussion about wealth grounded in your family’s values is a good start.”

“If you are willing to discuss your wealth, as well as provide financial education, it is never too early to start,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. He would keep the following touch points in mind:

  • Family values. ”It’s never too early to share your values concerning wealth with your children,” Heilmann says. “Younger children might be encouraged to help select canned goods to donate to a food drive, while older children might be engaged in co-creating a values statement that encapsulates the purpose and meaning of wealth in your family. Defining values is key to any conversation about money.”
  • Age. “Engage in age-appropriate talks,” Heilmann says. “That might mean credit cards and savings with a teen and the family business with a young adult.”
  • Trusts. “If your children are trust beneficiaries, educate them about the purpose and goals of the trust,” he says. “That should help them have appropriate expectations and, for older children, assist them in making long-term financial plans.”

Asking for help

“Some families choose to supplement their children’s financial skill set by having professionals work with the family to provide education, insight and share examples,” says Jody L. Weber, senior vice president, Client Segment Marketing at U.S. Trust. Look for a financial education program that offers education on a broad range of topics — from credit reports to trusts, Weber says. “Educational sessions should be age appropriate and come in a variety of formats: online, one-on-one, group presentations or retreats. For millennials, they should be social media friendly.”

1 Accenture research, 2013. (Latest available data.)

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

The 2015 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 640 high-net-worth and ultra-high-net-worth adults with at least $3 million in investable assets, not including the value of their primary residence. Among respondents, 55 percent have between $3 million and $5 million in investable assets, 32 percent have between $5 million, and $10 million, and 13 percent have $10 million or more. The survey was conducted online by the independent research firm Phoenix Marketing International in January and February of 2015. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95 percent confidence level.

Click on the icons below to navigate between parents and millennials.

With an unprecedented transfer of wealth under way, many parents fret that the younger generation may not be ready for it. Here’s a look at how both generations might alleviate concerns and best prepare for the responsibility that comes along with wealth.

Memo to all high-net-worth parents: Millennials, the generation born between 1980 and 2000 and saddled — perhaps unfairly — with a reputation for staring at smartphones and returning to the nest in their 20s, stand to inherit $30 trillion during the next few decades.1 Understandably, many parents — maybe you included — are concerned that the next generation lacks the maturity or the financial know-how needed to handle any inheritance.

While that may be the case, do not despair. “There are practical steps you can take to remedy the situation,” says Craig W. Bethel, a wealth strategies advisor at U.S. Trust. “And, ultimately, your children may surprise you with a willingness to learn or they may show you that they possess a stronger financial acumen than you might have realized.”

PART ONE: PARENTS

Starting the conversation

As it happens, “a shift to more openness may already be under way,” says Bethel. “A rise in affluence-related news stories — contrasting economic conditions, wealth and social responsibility — may have prompted children to ask questions about family assets.” And millennials have a reputation for wanting answers.

 

If you haven’t had “the talk” about wealth, consider this: With Internet access, a teenager can uncover many facets of your financial information with just a few clicks — mortgages, home sales and corporate financial reports may all be publicly available. “Better to raise the topic and position it in a manner that is consistent with your family’s values than to have them use their imagination to fill in the blanks,” says Paul D. Stavig, a wealth strategies advisor at U.S. Trust. “A general, age-appropriate discussion about wealth grounded in your family’s values is a good start.”

“If you are willing to discuss your wealth, as well as provide financial education, it is never too early to start,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. He would keep the following touch points in mind:

  • Family values. ”It’s never too early to share your values concerning wealth with your children,” Heilmann says. “Younger children might be encouraged to help select canned goods to donate to a food drive, while older children might be engaged in co-creating a values statement that encapsulates the purpose and meaning of wealth in your family. Defining values is key to any conversation about money.”
  • Age. “Engage in age-appropriate talks,” Heilmann says. “That might mean credit cards and savings with a teen and the family business with a young adult.”
  • Trusts. “If your children are trust beneficiaries, educate them about the purpose and goals of the trust,” he says. “That should help them have appropriate expectations and, for older children, assist them in making long-term financial plans.”

Asking for help

“Some families choose to supplement their children’s financial skill set by having professionals work with the family to provide education, insight and share examples,” says Jody L. Weber, senior vice president, Client Segment Marketing at U.S. Trust. Look for a financial education program that offers education on a broad range of topics — from credit reports to trusts, Weber says. “Educational sessions should be age appropriate and come in a variety of formats: online, one-on-one, group presentations or retreats. For millennials, they should be social media friendly.”

1 Accenture research, 2013. (Latest available data.)

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

The 2015 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 640 high-net-worth and ultra-high-net-worth adults with at least $3 million in investable assets, not including the value of their primary residence. Among respondents, 55 percent have between $3 million and $5 million in investable assets, 32 percent have between $5 million, and $10 million, and 13 percent have $10 million or more. The survey was conducted online by the independent research firm Phoenix Marketing International in January and February of 2015. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95 percent confidence level.