Do you plan on leaving an inheritance?

FRIDAY, SEPTEMBER 14: Leaving an inheritance or a legacy for the next generation is definitely a personal choice and there is no right or wrong answer to it.

Giving an inheritance can mean sacrificing your today for someone else’s tomorrow and if you talk to the elderly, you will hear that the focus was always on making the next generation more financially secure.

However, we tend to forget that in those days, the first born received the assets and if you were second or third in line or worse if you were a female, you would not get anything.

So how in today’s times have we become a greedy society while expecting a financial windfall from another generation?

Challenges

We have read countless articles about baby boomers and the financial challenges they are facing and also how a large majority of boomers plan to spend everything before they die and pass along little to no inheritance to the next generation.

In 2006, AARP released results of a study regarding inheritance; it revealed that four out of five boomer households had received or will be receiving an inheritance, however only 15 per cent intend to give one.

Another survey was done by Sun Super in 2009, who interviewed 1,000 people per generation period and each person was asked one simple question:

Do you plan to leave a legacy?

So, why is there such a glaring difference in the baby boomers view on inheritance?

The reality is that people are now living longer but retiring around the same age, making the retirement years almost a third of their lives.

The baby boomer generation recognizes this and for a lot of them, it’s not a lack of effort or interest that is driving them but the realization that in order to maintain their lifestyle during the retirement years and not be a financial burden to their children (which their parents may have become), it means not being able to give to the next generation.

You should never expect an inheritance or make it part of your retirement plan, no matter how sure you are of the situation. Things can change very quickly. As I say to clients: “people can get real funny about money.”

I do however firmly believe that if you plan to be the recipient of a legacy, then you should also plan to leave a legacy. Now it doesn’t always have to be property, cash, investments, family jewels or artwork.  A lot of people are looking at life insurance benefits to fill the requirement. 

Naming children or a charity as the beneficiary of a policy can certainly be another option.

Remember that inheritance is a gift and should not be conditional. Attaching strings only breeds bitterness and resentment.

Also setting the right expectations about inheritance with your loved ones is equally as important. If you plan to spend everything let them know, but have a sound backup plan if you run out of money before you die.

I can’t imagine the children in that scenario will be receptive to helping their parents out.

Whether you decide to leave an inheritance or spend it all is your choice; no one can predict the end date of their life and the goal of retirement planning is to have the money outlive you. What you do with your pot at the end of your rainbow is for you to decide.

Carla Seely is a senior wealth manager at AFL Investments.  She may be reached at 294-5712 or [email protected].