Have you noticed that your senior parents may be reluctant to discuss estate planning with their children? Obviously, there’s the discomfort of talking about death, but there’s also that long-time reluctance about discussing financial issues.
This lack of conversation between the generations may be contributing to poor retirement and estate planning.
Needing to fund retirement
A HomeEquity Bank survey a couple of years ago showed that more than one third of Canadians are waiting for inheritance money to fund their retirement rather than saving in pension plans. Another 45% are not expecting an inheritance, and 20% are not sure.
The survey also found that 94% of adult children over 45 want what’s best for their parents and they would be willing to forgo half of their inheritance to improve their parents’ lifestyle. Did you get that – they would give up HALF, not all. It’s not so much that they are greedy – they actually need the money.
Related: Are you counting on an inheritance?
It’s unfortunate that many boomers are not well prepared financially for their own retirements and are expecting an inheritance windfall to reduce their debts and provide an increased income to maintain their own lifestyle (but at least they aren’t the 34 per cent from a BMO study expecting to win the lottery).
Longer lifespan – higher costs
Many seniors would like to leave behind something to their heirs. But, first, they need to fund their own lives in retirement.
I recently watched a “Seinfeld” episode where George believes he’ll inherit hundreds of thousands of dollars from his parents because they have always lived so frugally. His hopes are crushed when he sees them walk into a fancy restaurant and they tell him they’ve decided to “blow it all.”
This desire seems not uncommon as HomEquity Bank found that 62% of the surveyed group say they’re not as concerned about leaving behind a large inheritance for their kids. Their own needs will be taken care of first and they are comfortable with wanting to enjoy their retirement. This feeling increases with Canadians over 65 (71%) presumably because they are already experiencing increasing costs.
Also, keep in mind that people are living longer. Census data shows that the number of centenarians is increasing every decade. As parents get older, more money than planned is spent to finance their lifestyles especially health-related costs and daily assistance living. They are running through their financial resources – even tapping into their home equity.
Sharing the wealth
Many households share their wealth with younger generations while they are still alive. Grandparents pay for their grandchildren’s education as well as joint vacations with their offspring, and even living expenses. They also help family members buy houses or cars and pay off debts. Boomers are using their own potential estate to fund the care of their own parents.
Final thoughts on waiting for an inheritance
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, are afraid of coming across as greedy. But, families need to establish realistic expectations.
Children waiting for an inheritance should start thinking about funding their own retirement instead of leaving it to chance.
In a HSBC study, the median expected inheritance was just over $77,000. That won’t fund a retirement for very long.