The anticipated “great wealth transfer” from baby boomers to their children is a topic that has been gaining traction in recent years. Various studies have shown that millennials and Generation Z have high expectations when it comes to inheritances, with many believing that they will receive substantial sums of money. However, the reality may be quite different, as evidenced by recent reports that reveal a growing disconnect between expectations and actual inheritances.

According to USA Today Blueprint, 68% of millennials and Gen Zers anticipate inheriting an average of nearly $320,000. Another survey by Alliant Credit Union found that 52% of millennials expect to receive at least $350,000. In contrast, a significant portion of baby boomers planning to leave behind inheritances stated that they will pass on less than $250,000. Furthermore, disparities in inheritance also exist along racial lines, with only one-third of white families and a mere one in ten Black families receiving any inheritance at all.

One of the primary reasons for the disconnect in inheritance expectations is the lack of communication between parents and their adult children about financial matters. Isabel Barrow, director of financial planning at Edelman Financial Engines, states that parents often fail to have open and honest conversations with their children about money. Factors such as inflation, high healthcare costs, and longer life expectancies also contribute to boomers feeling less financially secure and therefore less willing to part with their wealth.

The financial landscape for millennials and Generation Z is vastly different from that of previous generations. With skyrocketing costs of living, stagnant wages, and mounting student loan debt, young adults today face a multitude of financial challenges that their parents did not encounter at the same age. This makes it crucial for families to have transparent discussions about wealth transfer and financial planning to ensure a smooth transition of assets.

Liz Koehler, head of advisor engagement for BlackRock’s wealth advisory business, highlights the evolving views of inherited wealth. Parents today want to ensure that their children share the same values and principles when it comes to building and managing wealth. Firms and advisors are encouraged to facilitate open and honest conversations about money, philanthropy, and family values to align expectations and foster transparency.

However, despite the intention of many parents to leave inheritances to their children, a significant percentage do not have a specific plan in place. The Edelman report reveals that 90% of parents plan to pass down wealth, but nearly half admit to lacking a clear strategy for how to do so. This underscores the importance of creating a comprehensive financial plan that outlines not only the amount of money to be inherited but also the values and expectations surrounding the transfer of wealth.

The looming wealth transfer from baby boomers to younger generations presents both opportunities and challenges. While millennials and Generation Z may stand to inherit substantial sums, the reality may fall short of their expectations. By fostering open communication, creating detailed financial plans, and aligning values around wealth transfer, families can navigate the complexities of intergenerational wealth transfer with greater clarity and purpose.

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