As the baby boomer generation ages, there is a significant amount of wealth that is set to be passed down to the next generation. However, recent reports have highlighted a growing disconnect between how much millennials and Generation Z expect to inherit and what their aging parents actually plan on leaving them. While 68% of millennials and Gen Zers anticipate receiving an inheritance of around $320,000, a survey by Alliant Credit Union found that 52% of millennials believe they will inherit at least $350,000. On the contrary, 55% of baby boomers planning to leave behind an inheritance stated that they will pass on less than $250,000.

It is important to note that not all families have the same opportunities when it comes to inheritance. According to a study by the Federal Reserve Bank of Boston, only one-third of white families and around one in every 10 Black families receive any inheritance at all. Furthermore, more than half of these inheritances amount to less than $50,000. This highlights the racial wealth gap that still exists in America today.

The younger generation is facing financial challenges that their parents did not necessarily encounter at the same age. With rising food and housing costs, stagnant wages compared to inflation-adjusted earnings of previous generations, and a massive student loan debt burden, millennials and Gen Zers are finding it increasingly difficult to achieve financial stability.

The lack of communication between parents and their adult children regarding financial matters is a key factor contributing to the disconnect in inheritance expectations. Isabel Barrow, director of financial planning at Edelman Financial Engines, emphasized the need for open and transparent conversations about money within families. With inflation, high healthcare costs, and longer life expectancies affecting the financial security of the baby boomer generation, it is crucial to have a clear financial plan in place for passing down wealth to the next generation.

Changing Views on Inherited Wealth

There is a shift in how parents view inherited wealth, as they want to ensure that the values around building wealth are maintained by the next generation. Firms and advisors are now focusing on opening up conversations about money and setting common family values and expectations around philanthropic endeavors. However, the Edelman report highlighted a major issue – while 90% of parents intend to leave an inheritance, almost half of them do not have a specific plan in place for doing so.

Despite the challenges and disparities in inheritance expectations, the next decade could see millennials becoming “the richest generation in history” due to the massive intergenerational wealth transfer that is underway. It is essential for families to have open and honest discussions about financial matters, create a comprehensive plan for passing down wealth, and instill common values around money management and philanthropy in the next generation. Ultimately, how wealth is inherited is just as important as how much is inherited, and it should all be part of a holistic financial plan for the family.

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