A recent report suggests that Americans are unprepared for the biggest wealth transfer in U.S. history. According to Royal Bank of Canada (RBC) Wealth Management, Americans are “woefully” unprepared to transfer trillions of dollars from the older generation to their heirs, something that will happen in the near future.
The report suggests that the baby boomers will pass approximately $3.2 trillion on to their heirs, but only 30% have a full wealth transfer plan and another 30% have nothing in place. Perhaps, this unpreparedness stems from a trend that has repeated itself for several years now—people do not talk to their benefactors when inheriting money.
“It’s a trend that appears to repeat itself generation after generation,” said Tom Sagissor, president of RBC Wealth Management-U.S.
Saggissor believes, however, that the situation may be getting better.
“Parents today are educating their children about wealth at an earlier age and doing a better job of engaging them in conversations about the inheritance they will one day receive,” stated the study of 3,105 people in the United States, Canada and the United Kingdom.
“If benefactors do not communicate with the next generation, they miss the opportunity to tell them what you want to do with the money and what you want the family legacy to be,” says Bill Ringham, vice president and senior wealth strategist of RBC Wealth Management-U.S.
Though much improvement in communication and preparedness must still be made, the report suggests that U.S. residents are more proactive than Canadians and residents of the U.K. in reaching out to their children.
It seems that knowledge leads to more confidence in a successful estate. Almost half of U.S. respondents who have had a conversation with their heirs said they are confident their heirs will be able to grow their wealth, compared to just 39 percent in the U.K. and 42 percent in Canada.
“Discussions around estate and succession planning can be emotionally charged, so families tend to shy away from them,” Ringham said. “But for families that want to leave a legacy and ensure the nest egg they have built is protected across generations, communication and planning are key and the earlier it starts, the better.”