It’s no secret that Millennials and Gen Z are in a financial quagmire. That’s old news: the cost of living, inflation, and a stagnant job market have all pushed younger generations to the brink of despair. Millennials (born between the early 80’s to the late 1990’s), and Generation Z (born in the late 90’s) have had it rough: many are struggling to keep afloat in an economy that has been less than kind to them. This goes all the way back to the 2008 great recession, which was the start of a chaotic, bumpy, economic ride that has affected elder Millennials several years later. Then came the pandemic, which upended the lives of many Millennials and Gen Z (economically speaking). There is, as of 2024, a looming recession on the horizon which is going to (further) diminish what little finances the younger generations have.

So, naturally, parents wants to help out. We think.

A broke millennial
The great wealth transfer between Boomer parents and their Millennial children is hopefully on its way

How are parents helping their kids out?

Housing is probably the most pressing issue for many younger people, as the astronomical cost of housing/rent has forced many young people (at a time when their parents were living on their own at the same age) to either move back in with their parents, buddy up with roommates, live off the grid in rural areas, or as a last resort, move out of North America altogether. Those who move often settle into cheaper countries, like Mexico, Portugal, or Thailand.

Usually, those who move have either a cushy job or remote job already lined up. If it’s a remote job, it’s through a North American company all lined up.

Living abroad can come with a set of unique challenges to deal with: cultural differences, infrastructure, climate, etc. It’s a whole new way of adapting to a new life.

The ability to up and leave may not be so easy: many have family, friends, and a network of people in Canada and the U.S. So moving to another country may not necessarily be the best option for younger people (or older ones, for that matter).

A young Gen Z leaves Canada for inexpensive places to live
Younger generations (literally) can’t survive in the West, not with the cost of living the way it is.

What is the solution for younger Generations?

For those who are choosing to stick it out, they continue to struggle, hopeful that the economy will improve, that the job market will bounce back, and that inflation will eventually ease. We’re seeing some of that take effect; the easing of inflation will no doubt help younger Canadians save, but it’s not a permanent solution to the whole mix of issues that Millennials/GenZ are facing.

What can parents do to help?

Millions of young people across America are expecting an inheritance from their parents. In fact, around a third of U.S. Millennials and 38% of Gen Zers are expecting a payday when mom and dad pass, according to Northwestern Mutual’s 2024 Planning & Progress Study.

Canadian Millennials and GenZ are following suit: more than HALF are banking (no pun intended) on an inheritance to help boost their income and their savings, according to an Edward Jones study.

Look, relying on the bank of mom and dad isn’t pleasant, but the reality is that while Millennials/GenZ are struggling, they need extra help: help that they’re parents didn’t need to the same extent (we’re generalizing here). A “living inheritance” – an inheritance from parents to help pay for the essentials while their (adult) children are in the prime of their lives – can go a long way to help members of the younger generation “launch.”

GenZ receiving money
A member of the younger generation receiving money for a living inheritance

This is all assuming, of course, that the younger generations will get anything at all – either in the prime of their lives – or when they retire. The way things are going right now, it’s kind of bleak: Millennials and GenZ will be lucky to ever retire.

While the younger generations are hopeful about their parents helping them out, their parents might be dashing their expectations: a study shows that Boomer parents are less amenable to forking over their inheritance, even to help out their children.

https://www.usatoday.com/story/money/2024/08/31/gen-z-boomers-inheritance/74908414007/

A study conducted by Northwestern Mutual shows a cavernous gap between the expectations of Boomers and that of their children:  while 38% of Gen Zers and 32% of Millennials are expecting (or hoping) for an inheritance, only 22% of boomers expect to leave an inheritance.  

Boomers, like everyone else, are feeling the financial pinch, too. The idea that Boomers will be living large on a sunny beach somewhere, during retirement, isn’t really the reality for a lot of Boomers: they, like everyone else, are worried about their finances.

Boomers are feeling the pinch and (mostly) spending less: they’re saving for their own retirement, which includes the healthcare facilities they might they wind up in after retirement.

So with everyone feeling squeezed, is there a way for Boomer parents to help themselves, their children, and save for retirement?

As it turns out: yes!

Is spending down all your assets really smart for you?

Well first, planning to either spend or squirrel away every cent of your retirement money may not make sense:  maintaining a safe withdrawal rate, on the other hand, leaves enough money in your retirement account without penny-pinching, and sacrificing your lifestyle after retirement.

What remains of your retirement portfolio when you pass away can be an inheritance for your kids. If you own a family home and want to stay in it until you die (as a Forbes survey revealed 92% of older adults do), this valuable asset could be passed down to your children. You could even joy being part of a multi-generational household.

Enjoy your future as a (maybe not-so-big) spender, while providing for your family.

Boomer saving for retirement
A Boomer saving for retirement – meanwhile, Millennials and GenZ don’t know when they’ll ever retire

One caveat: to maximize the benefit your kids get from you (financially speaking) you may want to think about providing a “living inheritance.” Many younger Millennials and GenZ are expecting something from their parents to help them along. Some inheritance can help younger people from the (admittedly) bleak financial future they are currently facing.

That inheritance, in the prime of your children’s careers and adulthood, could help them pay down their loans, and boost their savings.

See, Millennials and Gen Z aren’t really the stereotypical avocado-and-toast, latte-sipping, snowflakes that they’re portrayed to be (well, most of them aren’t, anyway). The younger generations are scraping by.

Baby Boomers Can Give their kids a Living Inheritance and prep for Retirement

As Baby Boomers edge closer to retirement, the topic of the transfer of wealth into the hands of the younger generations (for Gen Z in particular) has been brought up numerous times in the media. A generation, struggling to begin their adult lives, striving to keep afloat, would really benefit from a “living inheritance”— wherein parents would provide financial support while parents are still alive.

Hey, a “trickle down” concept that may actually work!

Understanding the Concept of a Living Inheritance

It’s basically as described – a “living inheritance” is supposed to help out the struggling members of Generation Y and Z. The money provided to these (adult) children is supposed to help pay for milestones: students debts, save for a house, etc.

The fun stuff, like trips, concerts, etc., can all be paid for by themselves when they have the money.

If parents really want to do this, they need to be able to balance their support with careful retirement planning. Parents need to ensure that they can both help their children, doling out money for their needs, while maintaining their own lifestyle in retirement.

Steps for Baby Boomers to Provide a Living Inheritance

If you’re a Boomer looking out for your own retirement, while trying to help your kids, you’ll want to follow these steps: 

1.Assess your healthcare needs: You may want to sit down with a financial planner on this one. Someone who can assess your potential healthcare needs and what you might need in the future: visits to the doctor, medicine, what type of healthcare facilities you may reside in, etc. All of this may take time, so discussing this with both your children and a financial advisor, could help. 

2.  Tax Considerations: Just as with your healthcare needs, you may want to discuss the implications of gifting money to your children with your financial advisor. There may be, depending on the area you live in, a way to gift a specific amount of money tax-free. Again, all of this should be discussed with your financial advisor. 

3. Trial-Run: One financial advisor recalled how one of his client’s had gifted his (adult) Millennial child with $200k as a “test-run.” Essentially, the parent wanted to see how well the child would spend his/her inheritance. Can you guess what happened? 

The child squandered it. This was an adult, by the way. So, the parent decided that instead of a “lump-sum” inheritance to their child in question, to instead dole everything out in Trust. You can find information about Trusts, here

One way to avoid this is to discuss what the money (the living inheritance) will be used for. If your children use it pay off their debts/put the money in savings, you’ll know the money is being used responsibly.

Boomer looking over payments
A Boomer looks to make payments towards his retirement, healthcare and wants to help his kids out

The Benefits of a Living Inheritance

So this is, like everything else in life, all about balance: your needs, desires, and whatnot with the need to help out your children.

There are drawbacks, of course: one drawback is the simple fact that for many who simply don’t have family to rely on, life will become tougher in the decades ahead, and we may see more “intergenerational unfairness” come into play. What that means is, according to a Think Tank called Generation Squeeze, is that people who succeed in life will be the ones with inherited wealth.

That is a discussion for another time, but in the meantime, if you want to help out your child(ren), a living inheritance may be your best bet, particularly when it comes to housing. This can strengthen the relationship between you and your children, and set them up for success.

Rich person enjoy money

Updated: June 2024

A supposed “wealth transfer” is occurring. How do rich people pass on their fortunes to their heirs? What can you learn from them?

A whopping $84 trillion in assets will trickle down to Millennials and Generation X. Families should (hopefully) put a lot of thought and planning into how that wealth will be passed down.

This is even more true for uber-wealthy families.

It’s no secret that Millennials and Generation Z are two generations that have been beset with financial and economic struggles: student loans, high inflation, housing, and low job prospects all paint a bleak economic future for both generations. This is why many members of the younger generations are scrambling to make money through “side hustles,” living with roommates for a lot longer, live longer at home, and scrimp and save as much as possible.

The Importance of Estate Planning

The most common challenges

Family Dynamics

Wealth Succession

Other Things

Family Relationships

Philanthropic Giving

Financial Education

Life Insurance

Estate Tax

Wealth Transfer

Passing on wealth to the next generation

This is where the importance of passing down your inheritance comes in:

For a lucky few (we’re talking a very small minority of people on the planet), they have had the good fortune to inherit wealth. The small minority of lucky (wealthy) Millennials and members of GenZ may face other problems when it comes to receiving their assets: they may inherit less than they actually believe. Taxes and other estate fees may eat up their inheritance. Here is how you can learn from the uber wealthy: a study of 270 individuals from families with $50 million showed that some of the most important lessons on wealth planning are as follows:  

The most Common Challenges in Wealth Succession

Managing tax liabilities while transferring your assets can significantly impact (i.e. diminish) the wealth passed on to heirs. This means that proper estate planning and a good strategy for passing down wealth is of the utmost importance. In fact, 33% of respondents to a survey said that COVID-19 lead to more frequent conversations about their familial wealth.

78% of people reported having unplanned conversations about wealth, which didn’t go well at all. 26% of of those respondents actually regretted having those conversations. Ouch!

Managing Family dynamics:

The above stat shows why families with strained relationships, conflicting values, and differing values all complicate the process of transferring wealth. This is where the strategies for successful wealth succession comes in: asset preservation, safeguarding your assets from economic downturns, and preparing your heirs for the future are all important (it’s especially important in this day and age, where inflation is at 40-year high.)

Younger Canadians are navigating an economic labyrinth filled with financial challenges; many strive to achieve financial security in the face of rising housing prices, significant student loan debts, and a competitive job market. All of these factors culminate to give many millennials and Gen Z individuals anxiety about their futures. Forget retirement: many Millennials and members of Gen Z are just trying to survive. Unless the economic landscape changes soon, many Canadians may end up leaving for our neighbours to the south (or make the trek to other countries around the world.)

Strategies for Successful Wealth Succession:

Estate planning is the basic cornerstone of wealth succession for affluent families (and not-so-affluent families.) This involves creating a comprehensive strategy to manage and distribute assets upon death (or in some cases, while the heirs are alive – which you can read about here.)

Wills: This is a no-brainer: everyone should have a Last Will and Testament, and if you need a basic Last Will drawn up, see here as to how we can help you with that. These are legally-binding documents to help specify how your assets should be distributed and managed upon your death.

Other things an Estate Plan should include:

Asset protection: optimize your tax strategy by utilizing tax-efficient strategies to minimize estate taxes. That will allow you to maximize your wealth and increase the amount of money that your loved ones get. That may include receiving professional financial advice, if you need it.

Family Relationships:

This should be a no-brainer, but having these conversations about money can elicit feelings of anger, sadness, confusion, etc. If you’re going to sit down and have these (uncomfortable) conversations about money, you’d better be prepared for some crying, anger (possibly screaming, yelling), and maybe even threats of physical violence. One way to handle this is through annual family meetings: gather everyone to discuss your plans for your estate, your long-term goals, and how you want your things to be handled upon your death. A good discussion to air things out may help clear the air of any ambiguity regarding your estate.

Philanthropy and Charitable Giving:

Many affluent families engage in philanthropy: they pass on their money to worthy charitable causes. This is their way of leaving behind a positive impact on society upon their deaths. You can see this with wealthy celebrities who have left everything to charity, rather than to loved ones. There are celebrities who believe that their own children should work for their own money (usually with the help of their parent’s connections, of course.) Funneling money through family foundations or through charitable trusts can seamlessly support charitable causes, and get the heirs involved in charitable giving. In other words, having your heirs involved in charitable giving and distributing that money may keep the children of the uber-wealthy from being spoiled brats who live off of their inheritance.

Financial Education and Mentorship:

Rich people, just like everyone else, don’t want to see their wealth squandered. They may also prepare the younger generation with lessons about financial literacy at a young age. Of course, this involves networking and connections (probably connections that many of us don’t have.)

Life Insurance:

Life insurance can serve as an effective tool for wealth succession. It’s pretty much a viable tax-efficient way to transfer wealth to heirs. Life Insurance can also be used as a way to pay off taxes on real estate.

Estate Tax Planning:

Estate taxes can significantly eat away at the wealth people have accumulated into your estate. For wealthy people, this is where estate planning attorneys/tax expert come into play: they help minimize tax liabilities. That isn’t what you want, right? You may want to do the same, and talk to an estate planning lawyer when you are settling your estate. You may also want to start with our estate planning articles, here.

Wealth Transfer Laws:

Wealthy families have to stay informed about new laws and tax regulations. They adapt and adjust plans accordingly. Regardless of your income level, you should follow suit and adapt by staying informed with the laws surrounding tax regulations.

Preparing the next generation:

Rich people don’t want their money to be blown – there is some evidence to show that by the third generation, inherited wealth ends up squandered. You too, can avoid having your money (and estate) squandered by emphasizing the importance of your heirs (and their children) about managing their money, consistently educating themselves on changes to the laws, and learning how to spend money wisely.

You can start this entire journey by creating a Will, Power of Attorney or a Living Will for yourself. You can start here. Wealth succession is a complicated journey that goes beyond the transfer of financial assets. You have to balance your assets, estate, family relations, philanthropy, etc. Managing all of this almost appears to be a full-time job. You can learn from wealthy families by making sure that your own heirs are up for the job.