Talking Inheritance

Faith & Finance

The Puritan poet Anne Bradstreet once wrote, “Wisdom without an inheritance is better than an inheritance without wisdom.”

As Baby Boomers age, it’s estimated they’ll leave a tidal wave of wealth to their heirs, perhaps as much as $68 trillion by 2030. But is the next generation ready for that wealth?

The Biblical Perspective on Inheritance

Anne Bradstreet’s wisdom likely stemmed from Ecclesiastes 7:11-12, highlighting wisdom's value alongside an inheritance. This biblical perspective underscores the importance of preparing heirs with wealth and the wisdom to manage it.

Current State of Wealth Transfer Preparedness

Research indicates that while Boomers are poised to make the greatest wealth transfer in history, they may need to prepare their heirs adequately. A study by Edward Jones revealed that while 48% of Americans plan to leave an inheritance, only 27% have discussed wealth transfer with their heirs, leaving many millennials and Gen Zers unprepared.

The Impact of Longer Lifespans on Inheritance

Longer lifespans mean Boomers might consume more of their assets due to rising healthcare costs, potentially reducing what’s available for inheritance. This reality necessitates early and ongoing conversations about wealth transfer to set realistic expectations.

Four Approaches to Wealth Transfer

The Edward Jones study identified four ways Boomers might transfer wealth:

1. Traditional Giving—Assets like cash, stocks, and real estate are passed directly to children. Parents must discuss these plans with their children to ensure mutual understanding and preparation.
2. Giving While Living—Boomers may help the younger generation by funding education, purchasing homes, or even paying for vacations. Early conversations about these financial supports can help manage expectations and alleviate concerns about future inheritance.
3. Generational Skip—Some Boomers might transfer wealth directly to grandchildren, aiding in education or business ventures. Clear communication is vital to avoid resentment from the skipped generation and ensure a smooth wealth transfer.
4. No Inheritance—Due to longer lifespans and increased expenses, some may find little or nothing left to inherit. Retirees are generally advised to draw down no more than 4% annually from retirement assets to preserve principal, but this might not always be feasible.

The Solution: Communication and Wisdom Transfer

Boomers must start discussing their plans with their adult children to ensure a smooth wealth transfer. Passing on financial wisdom is crucial, preparing heirs to be faithful stewards. Family conferences, possibly facilitated by a Certified Kingdom Advisor®, can be an effective way to start these conversations and ensure ongoing communication as circumstances change.

Preparing the next generation to manage inherited wealth involves more than just transferring assets; it requires imparting the wisdom to steward those resources responsibly. By fostering open communication and providing financial education, Boomers can help their heirs honor God and manage their inheritance wisely. Teaching them that everything belongs to God and instilling values of stewardship, provision, and generosity is the greatest inheritance they can leave.

On Today’s Program, Rob Answers Listener Questions:

• I have a question about setting up a will since I have never made one. What do I need to do to set it up?
• I recently became widowed and retired, with a total net worth of around $500,000, including the value of my home that I plan to sell. With an annual income of $31,000 from Social Security, I wanted advice on how much of my $500,000 I should reasonably invest in a new home, considering I also want to become a foster parent and live in the house myself.
• I am asking about applying for Social Security benefits since I was informed that my job was being phased out at age 64. However, I had already earned more than the allowed amount for the year. I wanted to know if I started receiving Social Security later in the year, after August, if I would still get a check or if there is some sort of "clawback" since I exceeded the earnings limit earlier in the year.
• I have a question about updating my will, which I created 20 years ago in North Carolina. Is it still valid, or do I need to change it since I now live in Florida?

Resources Mentioned:

• The Great Wealth Transfer Starts with the Great Wealth Talk (Edward Jones Research Study)
• Rich Toward God: A Study on the Parable of the Rich Fool
• Find a Certified Kingdom Advisor (CKA) or Certified Christian Financial Counselor (CertCFC)
• FaithFi App

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