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The Next Generation of Wealth Transfer

Last week I came across an interesting Financial Post article discussing the generation known as “Millennials”. The Millennial generation is generally comprised of individuals born between 1980 and the late 1990s or mid-2000s. The article discusses recent reports dealing with the emergence of Millennials as a driving force in the economy.

The reports include one by Federated Investors and another by Goldman Sachs, both highlighting distinct features of Millenials that distinguish them from preceding generations, namely the Baby Boomers (born between 1945 – 1964) and the Generation X-ers (born between 1965 – 1979). Some interesting characteristics of Millenials include their use of technology, and their changing values and behaviour. In particular, Millenials are moving out, marrying and having children later; they are receiving a higher education on average and their attitudes toward ownership has been described as a “sharing economy”.

The reports demonstrate increasing attention toward the entrance of Millenials into their prime years of working and spending. Even the White House has taken particular interest. The Council of Economic Advisers for the Executive Office of the President of the United States, in October 2014, published a report entitled 15 Economic Facts about Millenials. The White House report discusses many of the same defining characteristics of Millenials.

A noteworthy statistic in the Federated Investors’ report is that Millenials are set to inherit $30 trillion US in financial and non-financial assets over the next few decades. This opens the door to questions about how Millennials will deal with their inheritance, and, in turn, their own estate planning.

The questions are not simple and neither are the answers. Even just the matter of the format of wealth transfer to Millennials could alter the impact of the $30 trillion wealth transfer. For example, trust funds can place significant limitations on access to and use by beneficiaries.

With changing economic values and priorities, estate planning for Millennials themselves could also differ from past trends. The way Millennial ideals will manifest in future estate plans has yet to be seen. Does the sharing economy mean that assets will not be preserved in the same way as prior generations? Will digital assets continue to form greater portions of estate plans? Do Millennials value spending during their own lifetimes above providing for a future generation?

From an estate planning perspective, some of these questions may be important considerations when dealing with a new generation of client.

Thank you for reading,

Suzana Popovic-Montag