Let the Good Times Roll!
It’s always good to end the week on a high note and once again the baby boom generation is in the news. A recent report by Decima Research says almost $1 trillion in cash and other assets will be transferred to the children of baby boomers in the years to come. The baby boomers are without a doubt the richest generation that Canada has produced to date. Even in death, the baby boomers will continue to shape our society.
In the past, the typical inheritance was likely considerably less than $100,000. However, when asked, more than 50% of the children of baby boomers expect to receive $283,000 on average. This figure represents a significant increase from the past and is indicative of the wealth that baby boomers have accumulated over the years. Half the $283,000 will be received in cash and the rest in real estate and valuables.
However, to me it is also clear that baby boomers will live longer than past generations and likely spend at a greater rate than their parents ever did as they fight the ravages of old age. Ultimately, there may not be as much to pass along as their children would like to think. The baby boomers also have an altruistic streak and may leave some of their wealth to their favourite charity.
Regardless of who gets the money, the need for proper estate planning is clear. Now is the time for boomers to get their personal affairs in order if they haven’t already. Baby boomers should let their children know now what their wishes are in order to avoid family fights in the future when their estates are being distributed. If parents are afraid that their children will react angrily if treated differently, they should nevertheless let them know and the reason why. The emotional and financial costs to the next generation is far greater than the immediate upset if a parent tells a child that he or she is being treated differently under the terms of their Will or that a charity is slated to receive the bulk of their estate. Perhaps a family conference with an outside facilitator is the way to go. Unfortunately, no matter what the baby boomers do, estate litigation is likely to increase as their children fight over their inheritance or try and prove what the “true wishes” of their parents were.
Finally, the generation which benefits from this trillion dollar transfer will have to carefully decide what to do with the windfall. Many will pay off their mortgages or other debts affording them the opportunity to accumulate their own personal fortune and pass it on to the next generation. Estate planning will always be with us… the sooner it’s done the better.
Thanks for reading and enjoy the weekend.
Justin de Vries