What If I Don’t Want to Give My Kids My Assets?

Just because Warren Buffet wants billionaires to sign his giving pledge, doesn’t mean you have to.  However, not everyone wants to leave everything to their kids.

There are many reasons why some parents simply don’t want to give all, or a large portion of their assets to their children. Type “A” personality parents who made every sacrifice to grow their wealth, may be disappointed with kids who aren’t at all motivated. A family may also be fragmented by politics, or disappointed in their children’s selection of partners.

25204256865_58d1892fa3_oAmerica is about to see a massive transfer of wealth from baby boomers, who’ve stockpiled an estimated $30 trillion. The “Me Generation” will probably spend some of its fortune, but there’ll be a lot remaining to pass along to their heirs. Research shows that between 2031 and 2045, as much as 10% of U.S. wealth could change hands every five years.

Think Advisor’s recent article, “Who Leaves an Inheritance, Who Doesn't,” says that some people are more inclined to leave an inheritance than others. The reasons for doing so aren’t all intuitive.

In an effort to better understand what influences an individual’s intention to leave an inheritance, researchers at Kansas State University analyzed data from the 2016 Survey of Consumer Finances. The survey is given every three years by the Federal Reserve. It gathers data about U.S. household balance sheets, income, expenditures, key demographics and attitudes. After controlling for net worth, household income and other demographic characteristics, KSU used a binary logistic regression model to parse out the variables associated with the expectation of leaving an inheritance.

The results revealed the traits that are closely linked to leaving an inheritance and those that aren’t. They found that children aren’t a significant predictor of whether a person is likely to leave an inheritance. Likewise, owning cash-value life insurance or being a habitual saver doesn’t seem to play a role in an individual’s bequest rationale.

The top predictor most associated with passing on wealth is an individual’s own expectation of receiving an inheritance. The survey found that people who expected to receive an inheritance were nearly 16% more likely to leave money to their heirs. However, those who actually did receive an inheritance, were 7% more likely to want to do the same for their own family.

It is not a shock, but a second leading predictor is a person’s attitudes about leaving an inheritance to others. Those respondents who ranked this goal as important, are 9.5% more likely to expect to leave an inheritance, as opposed to those who said it wasn’t important.

One interesting note: people who own businesses place a high value on inheritances. Perhaps the same drive that fuels the acquisition of wealth to attain a luxurious retirement, also pushes individuals to want to provide for their families.

In the end, what families leave to their children is just as much about values, family lore and a sense of belonging, as the asset left for children and the grandchildren.

An estate planning attorney can help you create a plan that addresses the assets you’d like to leave for the family members, charitable giving, a plan to manage estate taxes and a means to pass along more intangible and meaningful assets, like values and principles.

Reference: Think Advisor (October 19, 2018) “Who Leaves an Inheritance, Who Doesn't”

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