The finding was part of U.S. Trust’s “Insights of Wealth and Worth” survey. U.S. Trust asked wealthy Baby Boomers where their wealth came from; 84% said their wealth is a byproduct of focus and hard work. This held true even for those who received a large inheritance—three quarters of inheritance recipients also said their wealth is the byproduct of focus and hard work. Only 14% of respondents attribute their wealth to being part of a family that is financially fortunate.
Nearly half (47%) of respondents said there are consequences associated with accumulating wealth, including not taking enough time off, being too busy to spend time with family, mishandling personal relationships, and even letting their physical health suffer. Because of this, the survey found traveling and spending more time on personal relationships is more important than leaving an inheritance to their children or making a positive impact on society.
The survey also considered the importance of estate planning and found several shortcomings:
- While 88% of the wealthy have an estate plan in place, nearly four in 10 (39%) acknowledge that their estate plans are not comprehensive.
- Most of their estate plans contain basic elements such as a will and beneficiary designations for insurance and retirement savings, but more sophisticated tools such as trusts are underutilized. Nearly half (48%) of wealthy individuals surveyed have not established a revocable trust, and seven in 10 (72%) have no irrevocable trust, either. Three quarters (78%) do not have a life insurance trust and nearly nine in 10 (88%) have not established a charitable trust.
- Four in 10 (43%) do not have a financial plan that factors in the impact of long-term care and/or end-of-life healthcare costs on family wealth. Six in 10 (62%) have no plan in place to care for aging relatives.
- One in 10 (11%) has never discussed tax planning with their adviser, even though only one in three people surveyed strongly agrees that their investment portfolio is structured to minimize the impact of taxes.
- Only 3% of wealthy entrepreneur business owners have a business succession plan in place.
- Nearly half (46%) do not strongly agree that they understand all the elements of their estate plan.
- Fifty-six percent have not documented personal property and assets, and half (51%) have not documented instructions about the distribution of personal possessions among heirs, often a source of family conflict in the settlement of estates.
Not only are many wealthy Baby Boomers lacking a comprehensive estate plan, they are not sufficiently preparing their children either, the U.S. Trust survey found.
“We have found a significant dichotomy between clients we talk with, who tell us that intergenerational wealth transfer is the single most important issue on their minds, and a large segment of high net worth population we surveyed, who are not taking action and therefore leaving the legacy of their life’s work to chance,” said U.S. Trust President Keith Banks.
The survey found:
- Only about one third (34%) strongly agree that their children will be able to handle any inheritance they plan to leave them.
- Nearly half (45%) do not believe their children will reach a level of financial maturity to handle the family money they will inherit until they are at least 35 years old.
- About half (52%) of parents surveyed have not fully disclosed their wealth to their children, and 15% have disclosed nothing about the family wealth. When asked why they haven’t, 31% said they had never thought to do it. Other reasons cited were fear that their children would become lazy (24%); would make poor decisions (20%); would squander money (20%); or would be taken advantage of by other people (13%).
- Though 84% of parents think their children would benefit from discussions with a financial professional, nearly six in 10 (59%) have never introduced their children to the professionals managing their financial affairs.
The U.S. Trust “Insights on Wealth and Worth” survey was based on a nationwide survey of 457 high net worth adults with $3 million or more in investable assets, not including the value of their primary residence. Twenty-seven percent have between $3 million and $5 million in investable assets, and 10% had more than $10 million. The survey was conducted in January and February of this year.