The communication struggles that baby boomers and those in their parents' generation thought they had overcome in the decades since the 1970s have resurfaced. This time the gap is around the transfer of $25 trillion in wealth to be handed down by the elder generation to their heirs, $7.2 trillion of which will go to the boomers.1
A recent survey found evidence of a huge generational gap on views of inheritance and legacy. The missing communications or the "legacy gaps" between baby boomers in the United States (adults aged 40–59) and the elder generation (adults aged 65 and over) are among the key findings in The Allianz American Legacies Study, which reveals the following:
- Elders (22 percent) are seven times more likely than baby boomers (3 percent) to believe they owe their children an inheritance.
- The majority of the nation's baby boomers (68 percent) and those surveyed from their parents' generation (71 percent) say they feel highly confident discussing key elements of inheritance and legacy planning issues, yet only around one third (29 percent) of baby boomers and elders (31 percent) have actually done so with their own families.
- Non-financial leave-behinds—like ethics, morality, faith and religion—are ten times more important to both boomers and elders with children than the financial aspects of a legacy transfer.
- Fulfilling last wishes and distributing personal possessions were five times more likely to be the greatest source of family conflict during a legacy transfer than the distribution of finances, according to boomers whose parents are not alive.
- Top profile choice for the ideal legacy advisor is someone like Oprah Winfrey for boomers and Billy Graham for those in the elder generation. High net worth individuals, both boomers and elders, prefer Warren Buffett.
"Many people wrongly assume the most important issue among families is money and wealth transfer—it's not," said Dr. Ken Dychtwald, president of Age Wave. "This national survey found that for the overwhelming majority, legacy transfer has to do with deeper, more emotional issues. An inheritance focuses primarily on the money, but a true legacy also includes memories, lessons and values you teach to your children over a lifetime."
To understand the emotional and financial implications of this unprecedented transfer, Allianz, in its American Legacies Study, asked 2,627 people—boomers and elders—to identify how they define leaving a legacy and how families are communicating about these sensitive issues today.
Allianz Life engaged Age Wave to design the study, with the survey conducted by Harris Interactive®. The study identified five key areas about what it means to both boomers and those in their parents' generation to leave a legacy:
1. Values, Not Valuables
The study found that both baby boomers and those in the elder generation were uncomfortable discussing the one-dimensional topic of leaving an "inheritance" but both enthusiastically embraced the idea of leaving a "legacy" because it captures all facets of an individual's life—including their family traditions and history, sharing stories, values and wishes.
Passing along "values and life lessons" is overwhelmingly considered (by over 75 percent) the most important element of a legacy for both generations. Nearly 40 percent of the elder generation says it is very important to pass financial assets or real estate to their children, but only 10 percent of baby boomers feel the same.
2. Negotiating the Legacy Gap
The study found that although both boomers and those in their parents' generation say they are having in-depth conversations about legacy and inheritance, most of these conversations are not happening in a truly meaningful or productive way. Sixty-eight percent of baby boomers and 71 percent of those in their parents' generation say they have a high comfort level discussing legacy and inheritance, yet only 31 percent of elders and 29 percent of boomers actually have had a thorough discussion that includes all "four pillars" of legacy: (1) values and life lessons, (3) instructions and wishes to be fulfilled, (4) personal possessions of emotional value, and (5) financial assets or real estate.
3. Are You the Alpha Child?
An Alpha Child—defined in The Allianz American Legacies Study as "the child parents turn to first"—typically guides legacy planning. The profile of the Alpha Child is one who keeps the family connected and is a strong communicator.
Two out of five elders with more than one child say they have an Alpha Child; however, many boomers who have siblings don't know who the Alpha Child is—they over-estimate by a factor of four that they are the Alpha Child.
Almost 50 percent of the boomers who are Alpha Children say it is their responsibility to initiate legacy discussions with their parents, and 77 percent say they are comfortable in discussing legacy.
4. Performance-Based Inheritances
Performance-based distribution gives more to the child that has cared for the parent and less to the children that were a source of stress and conflict. This distribution plan is particularly favored by individuals with a high net worth.
Seventy-one percent of elders with a lower net worth felt that distribution should be equal; 54 percent of their higher net worth counterparts felt the same.
Those in the elder generation are also twice as likely to view inheritance as a source of power. In fact, 34 percent of them feel making decisions about inheritance is an important source of power and control over their children.
5. The Ideal Legacy Advisor: Personal Connection over Performance
The top qualities both generations look for in a legacy advisor are honesty, trustworthiness, compassion, a good listener, and a strong and clear communicator.
The majority of those in the elder generation have made some plans for legacy transfer—only 11 percent have not—and 67 percent of them have sought professional assistance.
When it comes to selecting a legacy advisor, the key requirements of honesty, explaining things easily and good communication skills outrank helping to minimize taxes and working for a well-known company.
Oprah Winfrey topped (19 percent) the boomers' list of who personifies the ideal legacy planner and Billy Graham was the elders' favorite (22 percent). High net worth individuals—both boomers (21 percent) and elders (31 percent)—chose Warren Buffett.
Study Methodology
The online survey was conducted in the United States between April 22 and 27, 2005, among an over-sample of 278 baby boomers (age 40–59) and 345 elders (age 65 and over), all of whom have a net worth of more than $250,000. Figures for age by sex, education, race/ethnicity, region, income, and net worth were weighted where necessary to align them with their actual proportions in the population. Propensity score weighting was also used to adjust for respondents' propensity to be online.
Though the online sample was not a probability sample, Harris Interactive estimates with 95 percent certainty that the results for both the boomer (1,282) and elder (1,345) samples have a sampling error of plus or minus three percentage points. Sampling error for the following sub-sample results: elders who have children (1,247), elders who have more than one child (1,128), boomers who consider themselves to be the Alpha Child (498), boomers whose parents are alive and who have siblings (857), and boomers whose parents are not alive and who have siblings (315) is higher and varies.
Harris Interactive conducted 200 additional telephone interviews on June 24 and June 25, with a random selection of the original 2,004 telephone respondents. This mini-survey was conducted to address the "four pillars" findings in more detail. One hundred additional interviews were conducted with adults age 40–59, an additional 100 interviews were conducted with adults age 65 and over.
To view The Allianz American Legacies Study, visit www.allianzlife.com.
Endnote
- John J. Havens and Paul G. Schervish, "Why the $41 Trillion Wealth Transfer Estimate Is Still Valid: A Review of Challenges and Questions," The Journal of Gift Planning , 7, 1, (January 2003): 11–15, 47–50. See "Challenge Six."
