Written by: George Walper, Jr.
Estate planning and wealth transfer are huge considerations for wealthy investors.
They want to make the correct decisions in order to make the transfer of wealth as smooth as possible for their beneficiaries.Many of those investors have already gone through the process as a beneficiary themselves. They know what it is like to receive a sizable inheritance. They know the complications that can arise. They know the tax implications. They know the arguments that can ensue, even among family members who generally like each other.And many of them know the benefits of working with an advisor, both in receiving an inheritance and creating their own estate plan and wealth transfer details.But many do not, because they chose not to get professional advice about handling their inheritance.Our new study Legacy 2.0: Baby Boomers and Inheritances
investigates the decision-making process that Baby Boomers made in receiving an inheritance and how those same investors are planning their own eventual wealth transfer to provide an inheritance for their beneficiaries. Included in the study are many questions related to advisor usage in both ends of the process, as a receiver and as a grantor.The result of the study is that the process of receiving an inheritance and in providing an inheritance is often conducted without the benefit of advisor advice, which seems both unfortunate and intellectually unwise.In some cases, inheritors receive millions of dollars. The Spectrem study was designed for Baby Boomers who inherited at least $500,000, but half of the investors surveyed received more than $1 million. An injection of that level of wealth demands investors make decisions that can have future impact upon a portfolio. To make those decisions without the advice of a financial professional seems almost counter-intuitive.As an advisor, are you fully aware of the money that your clients have coming to them in the form of inheritance, or have you worked with an inheritor who chose to process the inheritance alone? Have you discussed with them what their intentions are regarding the use and allocation of those funds when they arrive? Have you ever received backlash for asking such questions?It’s surprising to see the number of investors who do not discuss their inheritance with their financial advisor. According to the study, 44 percent of inheritors did not meet with any advisor prior to receiving the proceeds of the inheritance. Among those who did seek professional guidance, 42 percent met with their own advisor while 19 percent met with the advisor from whom the inheritance was coming.This research just screams “opportunity missed”, most importantly for the inheritor. Depending on the size of the inheritance, inheritors have an opportunity to make decisions that will have positive impact for years to come, and could benefit beneficiaries accordingly and without too much difficulty.
The inheritors who did not discuss their inheritance with a professional probably have reasons for choosing not to do so. It would be beneficial to know what those reasons are. Advisors can ask clients both old and new whether they spoke to an advisor about their inheritance, and when they find a client who did not do so, advisors can ask them "why not?"The inheritors surveyed for the study reported a low level of impact upon their lifestyle as a result of receiving the inheritance, perhaps because they were already well positioned financially. That may also be true of their advisor relationship.While 59 percent of inheritors kept the same advisor they had prior to receiving the inheritance, 21 percent had no advisor at that time and decided not to hire an advisor upon receiving the inheritance. From a positive viewpoint, 9 percent of inheritors began using an advisor for the first time upon receiving their inheritance, 6 percent added the advisor who handled the inheritance to their personal team of advisors, and 5 percent switched advisors due to the inheritance.There are clients of all ages who are either expecting an inheritance someday or who are still in the process of receiving distributions from an inheritance. They need to know that an advisor can help them make wise choices with that influx of bucks. Offering to help is not an inappropriate action, just as it is not inappropriate for an investor to decline the offer.Wrong-minded perhaps, but not inappropriate.