Scaling back bequests
Many parents, of course, won't exhaust their savings. The Center on Wealth and Philanthropy at Boston College estimates that baby boomers and their offspring could inherit as much as $27 trillion over the next four decades, with the progeny of the wealthiest pocketing much of the windfall.
But there are signs that expected bequests are under pressure. According to Boston College's Center for Retirement Research, from June 2006 to June 2010, falling asset values reduced projected inheritances for baby boomers by an estimated 13%. Stock prices have since recovered, although house prices in most markets have not.
Even the affluent are pulling back. Among those with $250,000 or more in investable assets, only 41% said preserving inheritances was a top concern, down from 54% in 2009, according to a Merrill Lynch survey released earlier this year. Due in large part to a 22% decline in projected future bequests of $500,000 or more, the amount individuals expect to transfer fell by 19% from 2008 to 2009, according to Michael Hurd, the director of the Center for the Study of Aging at Rand, a nonprofit research organization.
Just as telling is a recent study from Northwestern Mutual Life Insurance in Milwaukee. When asked how prepared they feel to live to various ages, one-third of surveyed adults ages 60 or older said they didn't feel prepared financially to live to age 85; almost one in two said the same with regard to age 95.
Suffering in silence
Not surprisingly, many families are loath to discuss these issues.
In addition to serving as a reminder of the older generation's mortality, a conversation about inheritance or Mom and Dad running out of money can provoke anxiety in parents. Many are uncomfortable disclosing the details of their finances in the first place, even more so when they're worried about disappointing their children.
Adult children, in turn, aren't eager to ask their parents about money for fear of coming across as greedy. Some feel guilty for thinking about their own financial needs at a time when parents could be facing steep medical or long-term-care expenses.
"Due to the new realities of longevity, adult children -- who have rightfully assumed they would inherit something substantial from their parents and have lived their lives accordingly -- can no longer count on that," says Lillian Rubin, a sociologist, psychologist and author. Adult children, she adds, "often feel guilty for even thinking about" inheritance.
Nonetheless, financial advisers say, it is important for families to talk -- if only to establish realistic expectations.
Peter Bell, 59, says he and his parents "have always been very open about talking about finances." That frankness has helped them through some tough choices in the past few years.
Bell, the president of the National Reverse Mortgage Lenders Association in Washington, D.C., "always assumed" his father, Jerry, 87, and mother, Florence, 88, would leave a substantial inheritance.
After his parents lent his brother money several years ago, Peter Bell says, they "decided I would get the house and everything else would be split."
But when the elder Bells decided almost two years ago to move into a continuing-care retirement community, it became apparent they would need the proceeds from the sale of their home to finance the community's $425,000 entry fee. Worse, because the depressed Florida real-estate market hindered their efforts to sell their home in Delray Beach, the couple had to borrow the entry fee from their son.
"We have always considered our money as family money," says Jerry Bell, who anticipates repaying 85% of the loan from the proceeds of the home's recent sale. "When the kids needed help, we were there for them. And when we needed help, they were there for us."
Measures to take
If parents anticipate running short of money -- and if they and adult children are able to start a dialogue -- there are several steps families should consider, financial planners say. Among them: Have parents recalibrate their budgets, downsize to a smaller residence, buy an annuity or longevity insurance to lock in a lifelong income, or take out a reverse mortgage.
In situations where children have adequate financial resources, some advisers recommend the children pay a parent's health-insurance premiums, purchase a long-term-care insurance policy for him or her, give a set amount of money each month or purchase the parent's home to generate cash for living expenses. (Before implementing a strategy, talk with your financial and tax advisers.)
The process can lead to conflict, although the tension typically remains beneath the surface, says Claudia Fine, an executive vice president at SeniorBridge, a New York-based company that provides care-management services.
Very often, she adds, she sees conflict arise over expenditures on caregiving. "Because feelings about inheritance are not expressed, families have a hard time sorting out their differences."
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VIDEO ON MSN MONEY
Time for families to coexist in the same house again and pool their resources..
Home builders need to build houses that can accomodate multi generational
families and older folks (mine included) need to realize that it isn't fair to
live off of children If they can co exist together..
My dead beat brother sure isn't any help!
It's a problem shared by many!
ALSO STAY OFF THE DAMN GAMBLING BOATS!
THAT'S WHERE A GOOD BIT OF MY FOLKS MONEY WENT!!!
Seriously guys, time to stop looking at mom & dad as money that happens to be attached to a person and start viewing them as people who may or may not have money. If you take care of yourself then whether they have money or not is a non-issue.
How is it that when you try and post a simple response up here to what someone has said that it is considered spam? Yet ths blog is full of dozens of single ads and get rich quick scams. This is what should be monitored. Get your priorities straight MSN.
'many women are looking to date older men.'
ha, ha, ha, ha, ha, ha, ha, ha....
if you believe that, i have a bridge in brooklyn....
well, it is their money. just because they make it to retirement age doesn't mean the kids will have a windfall. that money should go to help care for them until the end and then pay for funeral costs. it shouldn't be turned over to the kids so taxpayers end up paying for the last years of their parent's care.
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