Early Inheritance Demands and the Transfer of Generational Wealth

Attorney Jane Dearwester

Individuals of retirement age are experiencing increasing pressure from their younger family members to distribute their wealth and inheritance prior to their death to fund and support the next generation.

Generational Differences

While most Baby Boomers could afford to buy and maintain a home on one income, Millennials in their 30s and early 40s are finding it difficult to manage their basic expenses, even with a two-income household, due to skyrocketing property values and a failure of the economy to support salaries that keep up with the cost of living. Gen X, now aged 45 to 60, are sandwiched between Baby Boomers and Millennials and are now tasked with sending their kids to college and taking financial responsibility for their aging parents. Some Baby Boomers do not have enough retirement resources to support their basic expenses and to cover health care costs due to the rise of inflation and they have been forced to go back into the work force while simultaneously trying to support younger family members. Recent statistics show that Gen Z young adults are now opening retirement accounts as young as age 19 to get ahead of the curve in an ever changing and unpredictable economy. This flips the script on Gen Z being stereotyped as frivolous spenders, and they are instead being characterized as “retro spenders” – more focused on living within their means and making savings a priority. In a time when many older workers are being pulled back into the nine-to-five grind, Gen Z’s quiet return to tradition may be what saves the future retirees from the same fate.

Keeping Assets in Your Name

At McIntyre Elder Law we typically advise our clients to keep assets in their own name during their lifetime, and to make strategic gifts or bequests to loved ones that vest when it is most advantageous to each individual and to the family at large. There are strategies that we use to keep assets within the family unit to help elders qualify for long term care, or other government benefits, but that doesn’t mean “giving away” all of the elders’ assets that they’ve worked for their entire lives. It is important to remember that an estate plan is a dynamic set of documents that can flex and work for you if you pay attention to it and amend your plan when family dynamics change and your needs and financial goals inevitably change over time.

Prevent Financial Exploitation

Due to these increasing stressors in financial dynamics between generations, elder exploitation is on the rise. Younger family members are making more pointed demands on elder family members to make early distributions of inheritance. Unfortunately, we see cases where family members take advantage of and put pressure on elder family members to support their lifestyles or to put their home in the children’s names to avoid logistics upon the principal’s death. In most circumstances, this transfer of wealth is not necessary – and there are several tactics to pass wealth onto the next generation without giving up control of the assets or serious tax implications. Some of those are: establishing payable on death beneficiaries on all bank accounts and qualified accounts, including life insurance and other similar products. For real estate assets, North Carolina embraces the Lady Bird Deed, or enhanced life estate deed, that passes title to your designated heirs immediately upon your death and gives them a stepped up basis in the property as of your date of death. So many problems can stem from putting your property into someone else’s name during your lifetime – like divorce, bankruptcy, or lawsuits/liens that may come up against the new title holder which could result in you, and your family member, losing the equity in the property or losing the property entirely. These situations, while initially well intentioned, can have disastrous consequences.

McIntyre Elder Law Can Help

If your goal is to pass the wealth and assets that you have accumulated during your lifetime to the next generation, there are thoughtful and safe strategies to accomplish those goals without giving into pressure from your younger family members to engage in pre-death asset distributions. Having a strong estate plan in place and empowering yourself to understand the nature of your assets and how to make them work for you during your lifetime and how to help the next generation is the cornerstone of a good estate plan.

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