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Did You Know?
Factoring in an Inheritance Estate Planning: Not
Baby Boomers and adult children counting on an inheritance windfall from
their parents to help fund their retirement may be in for a surprise. Contrary
to popular opinion, the inheritance may never appear. Learn what the experts are
saying about prospects for Mom and Dad's wealth transfer - and what that means
to your clients' estate planning.
The Reality
According to a recent American Association of Retired Persons (AARP) report, the
reality is that 80% of 76 million baby boomers should not expect to receive an inheritance
at all. Inheritances are most likely not going to bail out their insufficient retirement savings
or shortages as a result of Social Security and Medicare.
Only 20% of families, or one in five, report ever receiving an inheritance, according to
an analysis of Federal Reserve figures. Most of those who did get money in recent years
got less than $25,000, with just 1.6% receiving more than $100,000.
Reasons for Reduced Inheritance Prospects
Even though the today's elderly generation is the wealthiest ever, AARP cites a variety
of factors to explain the smaller-than-expected inheritances to their children:
- Many boomers come from relatively large families, which means any expected
inheritance will most likely be spread among several children.
- Seniors and the elderly today are living longer, which means the boomers' parents may
be spending the anticipated inheritance for living expenses, travel, a second home or
move to a retirement community, or charitable gifts, donations and bequests, as well
as health care and wellness pursuits.
- Health care costs are rising steadily for both the boomers and their elderly parents.
Medical costs, long-term and chronic care, retirement homes and assisted living facilities,
and nursing and in-home care quickly eat into parents' assets, reducing the amount
in the estate available for inheritance.
Indeed, as they outlive their money, parents may need or have to ask for help.
Even well-off parents may have to be supported.
Further, due to the many new insurance annuity products now available, the recent trend
toward annuitization or income flows that stop when the recipient dies decreases the share
of inheritable assets.
Estate Planning Implications
- Discount or minimize the importance of an anticipated inheritance
in clients' estate plans.
Retiring baby boomers may need to take into account a reduced inheritance in
formulating their own retirement and estate planning strategies and what they will
leave to their children.
- Have clients broach the inheritance subject to their parents – gently.
A good way to bring up the topic of a potential inheritance is for the boomers'
to discuss their own estate planning with their parents as to grandchildren and estate tax
considerations. Asking for their parents' help in clarifying the estate plan helps start a
candid discussion as to their finances and long term needs. As it has been said,
“The more you know ....”
- Concentrate on the Boomers' own wealth building and preservation strategies.
In addition to the standard retirement planning, look into other financial vehicles,
such as the new annuity products and advanced trusts, to accomplish clients' goals.
To learn more about insurance strategies in retirement and estate planning for boomers
and their parents,
Contact Us
Outsource Insurance Services, Inc.
269 S. Lorraine Blvd.
Los Angeles, CA 90004
(323) 908-7726
www.outsourceins.com
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