Americans are "woefully" unprepared to transfer trillions of dollars from the older generation to their heirs, something that will happen in the near future, says Royal Bank of Canada Wealth Management in a new report.
Only 30 percent of Americans have a full wealth transfer plan and another 30 percent have nothing in place to implement the transfer of the nearly $3.2 trillion that baby boomers will pass to the next generation in the United States alone, according to the RBC Wealth Transfer Report 2017. The rest may have just a will or a partial idea of what they want to pass to their heirs, the report said.
Baby boomers who are getting ready to pass on trillions of dollars did not have conversations with their elders when they inherited money and most are perpetuating that behavior, authors of the report said. Only 37 percent of those who will inherit money have discussed it with their benefactors, the report said.
"It's a trend that appears to repeat itself generation after generation," said Tom Sagissor, president of RBC Wealth Management-U.S.
But the situation may be improving, he added.
“Parents today are educating their children about wealth at an earlier age and doing a better job of engaging them in conversations about the inheritance they will one day receive," stated the study of 3,105 people in the United States, Canada and the United Kingdom.
“If benefactors do not communicate with the next generation, they miss the opportunity to tell them what you want to do with the money and what you want the family legacy to be,” says Bill Ringham, vice president and senior wealth strategist of RBC Wealth Management-U.S.
Although vast improvements in communication and preparedness still need to be made, U.S. residents in the study are more proactive than Canadians and residents of the U.K. in reaching out to their children.
Knowledge appears to build confidence. Almost half of U.S. respondents who have had a conversation with their heirs said they are confident their heirs will be able to grow their wealth, compared to just 39 percent in the U.K. and 42 percent in Canada.
"Discussions around estate and succession planning can be emotionally charged, so families tend to shy away from them," Ringham said. "But for families that want to leave a legacy and ensure the nest egg they have built is protected across generations, communication and planning are key and the earlier it starts, the better.”
