A recent Globe and Mail article suggested that receiving an inheritance may be a thing of the past and estate planning will be only used by high net worth people.
Early reports stated that Canada’s baby boomers are on the threshold of an enormous wealth transfer from their parents – supposedly the wealthiest generation that ever lived.
I remember the former federal finance minister rubbing his hands together as he contemplated (and proposed) an inheritance tax on the billions of dollars that would be transferred in the next 10 or 15 years.
Boomers Expect to Receive An Inheritance
A BMO survey showed that 30% of boomers expect to receive an inheritance. I have to admit that I also had this expectation in the back of my mind.
My parents were frugal (miserly, I used to think) and had a fantastic savings habit. Their investment of choice was good old Canada Savings Bonds. When they retired in their early 60’s they travelled quite a lot.
Related: How Do You Choose Your Retirement Date?
My mother was at first worried about “spending all that money” but they revisited a lot of relatives, former friends and places that they hadn’t seen in decades and I was happy to see that this was such a positive experience for them.
My parents taught me to rely on myself and not to count on non-existent chickens so I’m not relying on any money I may or may not receive.
Anyway, those earlier expectations have been considerably reduced, especially considering their house was sold at a downturn in the market, they are settled into a fairly pricey retirement home, and, now in their late 80’s are reasonably healthy for their age. But, they saved for their own retirement and I just want them to continue to live comfortably and afford the services they need.
People are Living Longer
According to the Globe and Mail article, recent census data shows that the number of people older than 100 increased 35% in the last decade to 5,825 people. It seems like not too long ago that someone who reached 100 years was entered in the Guinness Book of World Records.
Considering today’s early boomers are entering their mid 60’s and many are still in their 50’s, it’s not too much of a stretch to anticipate an exponential increase in centenarians in the next decades. It doesn’t look good, estate wise, for their own children.
Related: Turning 60 – Some Things To Consider
The Sandwich Generation
Unfortunately, many boomers are not well prepared financially for their own retirements and are expecting an inheritance windfall to reduce their debts and provide an income. Instead many may have to help their parents financially.
Related: Assisting Your Elderly Parents
Health care costs are soaring; house prices in some areas have not recovered their previous highs. Many people suffered big losses in 2008 and, with low interest rates, boomer parents are exhausting their savings to maintain their own lifestyle. They may rely on their children for help with increasing health and personal care costs at a time when their own obligations – mortgages, children’s education, children moving back home, etc – still need to be met.
Final Thoughts
Financial advisors say it’s important for families to talk about their finances. The older generation is uncomfortable disclosing details and adult children, in turn, fear coming across as greedy, but families need to establish realistic expectations.
With many boomers still in debt, the need for income is a priority. Unfortunately for potential heirs, pension and annuity payments cease at death and life insurance premiums will be diverted to extended and critical care insurance.
It may be true that inheritances and the need for estate plans will only be for the wealthy.
What do you think?
