Baby boomers expect to leave $1 million or more to their children in the coming wealth transfer. Are the ready?
When the time comes for baby boomer parents pass on their riches, many millennials may be in for a lot larger windfall than they ever imagined.
Millennials do not appear to be prepared for the wealth they are about to inherit. Most Millennials estimate an average bequest of $309,000, significantly less than the close to $1 million or more they could get. According to Sun Life, such a significant quantity has the potential to throw a slew of issues into millennials’ financial lives if they do not plan ahead.
According to a Sun Life Financial Inc. survey done by Ipsos, baby boomers who plan to leave all of their assets to their millennial offspring anticipate to leave an average inheritance of $940,000. According to that same report, this amount is significantly higher among those who deal with a financial adviser, with those boomers expecting to leave just over $1 million to their offspring.
Canada has never seen so much wealth passed down through generations, with Canadians likely to leave as much as $1 trillion in inheritances by the end of 2026.
This is the largest intergenerational wealth transfer in our country’s history. Canadians have an incredible opportunity
Many Boomers find themselves with an opportunity to provide lasting financial stability for themselves and their loved ones for future generations, but planning is key. If you fail to plan, and if your children fail to plan, you could end up eroding your hard-earned nest-egg, with far too many dollars ending up going to fees and taxes.
However, it appears that few people are following the necessary estate planning processes. According to the report, less than half of the 44 percent of baby boomers who anticipate to leave an inheritance have a financial plan in place. Furthermore, nearly a quarter had not even discussed the inheritance they should be anticipating with their heirs.
The lack of planning ahead has a cost, both for boomers and their children. The boomers need to account for longer life expectancies, inflation and higher costs of living in retirement such as health-care if they want to leave the gifts that they intend to leave.
Millennials will need to plan also. According to the study, as much as 57 percent plan to use the inheritance to help build their own retirement plans.
It becomes all the more important to have a conversation about estate planning, and the sooner the better.
The rising cost of living has made such preparation even more vital, with many millennials counting on inheritances to help fund soaring housing and loan bills. According to the report, 55% plan to spend their inheritance towards increasing home expenses, while 36% plan to pay off debt.
An inheritance presents a huge opportunity for Millennials. Their well-documented economic struggles as the generation who has faced immense economic pressures and rising housing prices has been with us for many years.
This report is important, and I think the lesson is that it all starts with a conversation and making a plan.
If you would like to see how prepared you and your family are, TAKE THE QUIZZ
THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.