Eighty percent of those surveyed said passing on their financial values to the next generation is important to them. When they were asked to rank what they care most about when creating a legacy, more than one-third ranked personal values first and another third said memories of experiences shared with family members was their number one value. Only 21% said the financial assets themselves ranked number one.
In line with those findings, 67% of parents said they often discuss how their values shape their financial decisions with their children. Millennials were most likely to discuss how their values shape their financial decisions with their children at 76%, compared with 59% of baby boomers, who said they did the same. Seventy-seven percent of all respondents said they take the time to help their children understand the reasons behind their financial decisions.
More than half of parents have talked with their children about which charitable organizations they donate to, but only 40% have discuss the actual amount of money that they donate. In addition, 58% of parents have discussed investing and investment strategies with their kids, 44% have helped their kids manage their investments and 36% have given their kids money to make their own investments.
“Financial advisors can have a big impact by facilitating conversations across generations for legacy planning,” Keckler added. “This can also help the advisor get to know the next generation.”
Ameriprise drew some conclusions about passing on wealth to the next generation, and recommended those making the transfers:
• Calculate how much you can afford to give based on your future needs. Talk to a financial advisor to make sure the amount you give does not set back your financial goals.
• Be open with your plans. Make your intentions for the gift clear to those who will be recipients.
• Understand the current estate lifetime exemption and gift tax exclusion rules. Consult a professional to determine how you may be able to leverage these exemptions for tax advantages.
Leaving real estate to the next generation has its own rules, Ameriprise said. Those giving real estate should:
• Communicate your wishes in advance to ease potential family tension, especially if the property will be divided among multiple people.
• Have a detailed plan that outlines key information about the property such as maintenance costs, taxes, and potential improvements that may needed.
• Understand the tax implications of gifting real estate during your lifetime.
Unlike other assets, there is more to consider when passing along real estate, including whether the next generation wants it, how to divide the property, and whether the inheritor can afford to maintain it, Keckler said.
This is another instance when communication between the generations is a key to a successful transfer, she said.
“Advisors need to remember how important their role is in making these plans," she said. "For instance, I have seen some advisors do a really good job of helping clients with beneficiary planning. It is a way an advisor can distinguish himself or herself. These are the kinds of things that people talk about and that make a practice referable.”