With the high cost of housing in the greater Vancouver area, many young people are counting on the bank of mom and dad for their long-term financial stability. However, this faith may be misplaced, and they could be in for an unwelcome surprise. A new survey done by Vancity found that there is a striking disconnect between what millenials are expecting to get from their parents, and what the parents are planning on leaving for them. The survey found that more than 39% of metro Vancouver children expect to get an inheritance of at least $300,000, yet only 12% of parents are expecting to leave an amount that large. The implications of this can be large. Not only does this cause strife within the family, but millenials misplaced inheritance expectations can also dampen their motivation to succeed and amass their own wealth.
What could be causing this discrepancy? One issue is that people are living longer now, and their nest egg may need to stretch a lot longer than they had originally anticipated. Take for example a client of ours who has taken up residence at a local full-time care facility. The cost is $7,000 per month. What happens if you have the good fortune of them living well into their 90’s? By the time the wealth is transferred there may not be much left.
Another problem is the uncomfortable nature of discussing these matters with family. We have talked a lot about this before, and Don has been speaking about the concept of Family Confab for a few years now. Parents are often reluctant to talk about wealth-transfer with their kids, as it can bring up thoughts of death, which makes us uncomfortable, and to procrastinate the inevitable. However, without these extremely important and constructive conversations, a lot of long-term damage can be done. If any of this sounds familiar, you may want to take the time to sit down and think through a strategy. There are many resources for help, such as our own expertise here at Nilson & Company. The most important thing however is to start the discussion. It won’t be easy at first, but the payoff is a stronger, more cohesive family unit that is better able to tackle the challenges we all face today.