Survey Highlights Inheritance Expectation Gap

Takeaways

• There’s a notable “inheritance expectation gap” between older adults’ plans to leave inheritances and younger adults’ expectations of receiving them, as revealed by a recent LegalZoom survey.
• Older generations generally plan to leave more in terms of value and variety of assets (money, real estate, personal possessions, investments) than younger generations anticipate receiving.
• Open communication about financial and estate plans within families is crucial to avoid disappointment, financial instability, disputes, and stress for surviving family members.

Many older adults plan to pass on their hard-earned assets to their children. In fact, trillions of dollars are expected to be passed down from Baby Boomers to future generations over the next few decades as part of the so-called “Great Wealth Transfer.”

This transfer of wealth can include money, a home or other real estate, and personal possessions. Parents often also want to find ways to pass on intangibles like values and traditions.

Yet younger adults’ expectations do not quite align with older adults’ intentions, according to a recent survey by LegalZoom. Fewer younger adults say they expect to receive an inheritance, despite the fact that older adults report that they are likely to leave one. When they did anticipate an inheritance, younger Americans expected less value in general than older adults planned to give. These findings point to an interesting gap between older adults’ plans and younger generations’ more modest expectations.

Key Survey Findings

This past August, LegalZoom surveyed 1,000 adults aged 45 and older, which included Gen X and Baby Boomers who had grown children, and 1,000 adults aged 44 and under, which included Millennials and Gen Z. The survey investigated older adults’ plans for passing on their assets to their children as well as younger people’s expectations about receiving an inheritance.

The most common types of inheritance identified by all respondents were money, real estate, and personal possessions.

The survey findings identified a difference between older adults’ plans to transfer generational wealth and younger generations’ expectations, which the researchers coined the “inheritance expectation gap.” These differences showed up in several ways, including beliefs about whether an inheritance was likely, how much would be passed on, and what kind of assets an inheritance would include.

Older adults were more confident that they would leave an inheritance, whereas younger adults had less confidence in receiving one. According to LegalZoom, 60 percent of younger people said it was at least somewhat likely that they would get an inheritance in their lifetime. Meanwhile, 77 percent of older Americans said they planned to leave an inheritance, and over 50 percent said they were very likely to do so.

Younger adults also anticipated inheriting less than older adults planned. Sixty percent of older adults planned to leave at least $50,000, with 15 percent planning to pass down between $101,000 and $250,000. At the same time, many younger people expected smaller inheritances, with 24 percent (the biggest group of younger respondents) anticipating less than $10,000 and 13 percent anticipating less than $25,000.

Elder generations also said they planned to leave more across categories – including real estate, money, personal possessions, vehicles and valuable assets, and investments – than younger generations predicted:

• Sixty-two percent of older adults said they planned to pass down real estate, but only 47 percent of younger adults said they expected it.
• Sixty-two percent of older adults also planned to leave personal possessions, compared with just 41 percent of the younger generation anticipating receiving them.

Intentions and expectations for money were more closely aligned, though the pattern persisted:

• Fifty-nine percent of older adults said they intend to leave money to the next generation, and 56 percent of younger adults expected to receive it.
• Fifty-five percent of older people planned to leave vehicles and valuable assets, while just 35 percent of younger people anticipated this type of inheritance.
• Forty-seven percent of older adults foresaw transferring investments to their heirs, yet just 34 percent of the younger cohort predicted receiving them.
• Ten percent of younger people said they expected no inheritance at all.

The Impact of an Inheritance

Receiving an inheritance could impact your loved ones in a positive way, improving their financial security and quality of life, building generational wealth, and strengthening a family legacy encompassing shared values and traditions.

Younger adults who took part in the survey appear to recognize this. Regardless of their rather low expectations, most of them (60 percent) did say an inheritance would make them feel more financially secure. Nearly half (46 percent) said inhering from their parents would help them worry less about emergencies.

Over half of the older people surveyed said that their heirs would benefit financially from their inheritance. Seventy-seven percent said that passing on an inheritance was important to them, and 72 percent reported planning to transfer generational wealth. Forty-two percent said they wanted to leave an inheritance to give their children financial security.

Beyond financial security, many older adults reported that they also plan to pass down values and life lessons, family or cultural traditions, and heirlooms and keepsakes.

The Importance of Having Open Discussions

Many families never engage in candid conversations about their finances or their estate plans. Financial matters are often considered highly personal and private, even within one’s own family, and some people may worry that bringing these topics into the open may cause family arguments or create a sense of entitlement among heirs. At the same time, discussions about mortality can be emotional and uncomfortable.

Yet failing to talk through these sensitive topics can have negative consequences. For one, heirs may be unaware of the true financial situation of their loved ones. As the LegalZoom survey shows, poor communication causes a gap between what heirs expect and what they may receive. This can lead to disappointment, financial instability, and resentment.

Unclear or uncommunicated estate plans may also lead to family disputes after a loved one’s passing over asset distribution, personal belongings, or business succession. In some cases, these disagreements can become costly and emotionally draining legal battles.

In addition, when a loved one passes without clear financial or estate plans, the surviving family members may be left with the daunting task of piecing together information, often during a time of grief, which adds immense stress and burden.

To ensure that your wishes regarding your assets, belongings, or even end-of-life care are honored, you must clearly communicate and document them in an estate plan. Once you have a plan in place, notifying a trusted relative that these documents exist – and showing them were to find them – is essential. The LegalZoom survey found that nearly half of older Americans have not designated anyone to manage their estate plan.

To learn more about approaching your own estate planning or inheritance, check out the following articles:

• Baby Boomers: Inheritance Conversations With Your Children
• The Great Wealth Transfer: Managing Your Inheritance Wisely
• How to Divide Up Personal Possessions Without Dividing the Family
• Securing Storing Your Legal Documents
• 14 Essential Questions to Ask Aging Parents This Holiday