A mate of mine is married with three kids, two at private schools, a successful sales executive. But no matter how much he earns, it never seems enough. The new house extensions have really stretched the finances.
A real family man, he dotes on his widowed mother in-law. ‘She’s my superannuation,’ he confides with a whisper and a smirk.
For a whole generation of baby boomers (now ex-yuppies), waiting for the will is as tense as trying to win Lotto. It will be their salvation from a spending spree that has left them in hock up to their eyeballs.
It’s their parents old fashioned financial discipline that will have to bail them out.
A total of $12.8 billion was inherited in 2002 and $14.8 billion in 2003 but only 1.4 per cent of adults receive an inheritance in any given year. It is the biggest generational shift in wealth in history.
Here’s the shock though. While many have these wild dreams of their inheritance solving their financial problems the facts are a little more sobering. The average inheritance is $64,000.
According to the University of Canberra’s National Centre For Social and Economic Modelling, only one in every 100 inheritances is big enough to buy an average Sydney home.
More than half of all bequests in Australia are less than $20,000 and just 18 per cent worth more than $100,000.
The problem is that no-one involved in this great transfer actually knows how to handle this whole inheritance thing. And lets face it… neither side is good at handling the situation.
Get beyond the children’s dread of being seen by their parents as avaricious, gold-digging leeches, and you discover an undercurrent of resentment and even anger at the way this transfer of wealth is being handled. The truth is, most children are dying to talk to their parents about their inheritance.
Because of their own big spending and high credit costs, baby-boomers are anything but a savings-oriented generation. Unlike their parents, there are no memories of the Great Depression to curtail their consumption, and many of them have simply spent their way through life.
They not only need their inheritances, they are counting on them. And, ideally, they’d like some say in how the money comes and where it goes.
Parents, on the other hand, can lose all common sense when it comes to planning their estate. They often feel threatened by their children’s desire to learn more about their inheritance.
‘Power is money and control is power,’ one financial planner told me. ‘Most people want to control their kids and their spouses, and they find they can do it through money.’
Another friend of mine was stunned when his mother left her entire estate to him but with the parting instruction in the will to ‘look after your younger sister’.
How? For how long? With what?
Luckily he is close to his 30-year-old sister. On advice from lawyers she sued him for half the estate which he did not contest.
Even those baby-boomers and their parents who pride themselves on their ability to talk to each other, the subject of inheritance is taboo.
Most families can be divided into two camps. One where the subject is not even raised and the other where parents go to extremes of putting stickers on everything in the house to ensure it goes to the right child. But discussing the contents of the will is almost universally frowned upon.
Secret wills are usually made by two types of people. Those who have had previous family hassles and those who don’t want to acknowledge their death.
But why does a generation of people seemingly addicted to self-help books find it next to impossible to discuss inheritance with their parents? The reasons are many, but the guilt issue, with the self questioning it ignites at the top of the list. Chances are, even the most craven heirs have twinges of guilt over wanting Mum and Dad’s loot.
Why couldn’t we have earned this money on our own? If we did earn it, why don’t we have it? Where has it all gone? Maybe, just maybe, we should have run our lives a little better, given up the annual jaunts to Fiji or all those expensive kitchen toys.
Afterall, talking about passing on money usually means talking about the circumstances under which the money will be transferred. Don’t rock up and say ‘hey what do I get when you croak’. Try including the parent in the discussion by not using ‘I’ all the time. Be tactful. If you go in aggressively they will retreat. Give the parent the feeling of power so they don’t get defensive.
Make the conversation a joint thing. Make plans so that in the event of their death everything runs smoothly to their wishes. This could include knowing about account numbers.
Then there is the anger, possibly outrage, many parents feel about what they perceive to be their children’s raging sense of entitlement. Self-made parents are especially prone to this kind of reaction. They want their kids to make it on their own, just like they had to. Even successful business people cannot be counted on to act sensibly. Business maybe business but family is, afterall, family. For most of us the most important thing in our lives. Even the most accomplished business person can forget their financial acumen when it comes to dealing with matters of emotion.
Be that as it may, there are ways of figuring on your inheritance by explaining to parents the importance of proper planning to avoid high tax bills.
If the whole episode of talking about the subject face-to-face is just too excruciating, it may be easier for your accountant or financial planner to discuss it with your parent’s adviser. Focusing on the presumably shared concerns of the grandchildren.
But in the long run, it may be just as wise to assume you won’t get anything. If you do, it will be a pleasant surprise.
This post was written by David Koch for his book, Kochie’s 11 Step Money Plan for a better life, and is republished here with permission.