To Give and To Get

So what do we expect of each other?

By “we,” I’m referring to the two demographic groups at the center of the largest transfer of wealth in history—an estimated $25 trillion, and that’s a conservative number.

On the giving end is today’s elder generation: survivors of the Great Depression and World War II, hard workers, good savers. On the receiving end are their children, the 78 million–strong baby-boom generation, no spring chickens themselves, with the oldest among them now clearing the age of 60.

In a study commissioned by Allianz Life Insurance Company of North America, based in Golden Valley, we learn that the transfer of assets between these two groups is likely to be far from smooth. Based on interviews with 1,345 elders and 1,282 baby boomers, Allianz identifies several key “myths” that will come crashing down over the next decade or three.

Myth: The legacy being left by today’s elder generation is just like any other generation’s.

Allianz cites four reasons that this transfer will be unlike any other:

1)      Again, the sum of the financial assets is huge—greater than what’s been left by any earlier generation. Of the estimated $25 trillion, about $7 trillion will go directly to the boomer generation.

2)      Families are more varied and more dispersed than ever. Elders will divvy out their money not only to their children, but to stepchildren from multiple marriages.

3) The two generations don’t necessarily get along. The frugal elders are wary of leaving money to spendthrift children. Plus, these are the children of the ’60s, and some family grudges date back to conflicts from those years. For instance, elders are five times more likely to say that they would disinherit a child because of drug use than because of bad money management, and three times more likely to disinherit a child for being in prison.

4) We’re all living longer. Parents used to pass on an inheritance when their kids were in their 30s and 40s. Now, with the elder generation living well into their 80s, children may be in their 60s before their parents die, a situation that has a profound effect on the way the parents plan for their own needs.

Myth: Inheritance is the name of the game.

Both generations agree that there’s a difference between an inheritance (purely financial) and a legacy (values and life lessons, instructions and wishes to fulfill, and personal possessions of emotional value, along with financial assets). And they agree (77 percent of those surveyed in each generation) that passing on values and life lessons is important.

Where they part ways is on the relative importance of an inheritance. While 39 percent of elders believe it’s important to leave an inheritance to their children, only 10 percent of boomers think that’s an important thing for their parents to do. More boomers (65 percent versus 53 percent in their parents’ generation) believe it’s important for their elders to leave instructions and wishes to be fulfilled. They likewise put more emphasis (34 percent to the older generation’s 30 percent) on the importance of personal possessions.