snazzy sports car. She was dripping in jewelry and carrying a designer
bag. He wore an expensive watch. They lived in a swanky part of town.
The veneer of wealth vanished when they laid out their finances. Home
equity? Wiped out by their borrowing. Business? Gone bust. Credit
cards? A dozen maxed-out and using another to pay minimum balances.
Despite their financial tailspin, the couple didn't look a bit
worried, says wills lawyer Les Kotzer. When he asked what the husband
did for a living, the wife joyfully answered: "Harry's a waiter."
No, not the kind who works in restaurants.
"A 'waiter' because he's waiting for his inheritance," Kotzer says.
It could be a long wait.
Heirs betting on their parents' golden nest eggs are running into
harsh demographic realities.
Longevity and a slew of changes that have transformed family
relationships (ex-spouses, stepkids, stepgrandkids, siblings living
thousands of miles apart) are turning the already-prickly matter of
inheritances into a gargantuan challenge. Add the gaping generational
divide between Depression-era parents, who valued frugality above all
else, and their Baby Boomer children, who relish self-reward, and the
dynamics can be explosive.
"I see families who never talk to each other again," says Kotzer, a
Canadian lawyer who has written several books, with law partner Barry
Fish, on fighting over estates (the latest is Where There's an
Inheritance…). "Family to me is our greatest asset, and we are losing
family. …It's the savers vs. the spenders."
People are living longer. Health care costs for the frailest seniors
are eating up family estates. Their reliance on others to feed and
care for them and their finances can put more elderly at risk of
financial or physical abuse by the caretakers they depend on.
The shaky economy adds to the volatility as more adult children lose
their jobs and see their retirement savings and home equities dwindle
while debts mount.
Despite the downturn, more than $20 trillion will be transferred to
heirs in the next 50 years — the largest transfer of wealth in U.S.
history, according to the Center on Wealth and Philanthropy at Boston
College.
"Boomers took risks, and they have a high lifestyle," Kotzer says.
"The housing market went down. The (stock) market went down. A lot of
these Boomers have been laid off. Where's the money coming from?"
The prospect of an inheritance stirs a cauldron of emotions — not
always heartwarming.
Eileen Zenker, director of client services at SeniorBridge, a national
care management company, says it's common for children who are faced
with costly care for their parents to react this way: "I'm watching my
inheritance go down the drain."
Bill McGaw wants to make sure his children — not his stepchildren —
inherit his assets.
"Death does weird things to people," he says. "Especially to those who
are still alive."
Longevity erodes life savings
The number of Americans age 65 and over has topped 40 million, or 13%
of the U.S. population. That's the most ever, both in sheer numbers
and as a percentage, and the number will grow rapidly. It's estimated
that the 65-plus population will make up one-fifth of the nation by
2050.
Not only is the share of seniors growing, health care advances are
pushing the oldest of the old to even longer lifespans.
The fastest-growing age group among seniors is 85 to 94, jumping 30%
to 5.1 million the last decade, according to the Census Bureau. The
number of centenarians is projected to exceed 600,000 in 2050. That's
good news except for one key factor: Half of those living beyond 85
have Alzheimer's disease, a condition that devastates one's quality of
life while requiring costly care that erodes retirees' assets.
"Relatively few people today have money to pass on to the next
generation because they consume it in life," says Hendrik Hartog, a
professor of family and social history at Princeton University and
author of the recently published Someday All This Will Be Yours: A
History of Inheritance and Old Age. "It's consumed through retirement
communities or through health care."
Miami financial adviser Sandy Jukel says that interest rates are low
but cost of care keeps rising. "The end result, if proper planning is
not pursued, they inevitably run out of money," he says.
Adult children often mistakenly believe that Medicare and other
retiree benefits will pay for their parents' care. In fact, only
long-term health insurance will cover custodial care.
"So many children don't expect they'll be responsible for their
parents in later life," Hartog says.
The complications of inheritance only intensify when the children must
care for an aging parent. If the estate is not clearly divided in a
will, for instance, children who took care of aging parents often feel
that they should inherit more than the siblings who did little —
either by choice or because of geographic considerations, according to
estate lawyers. And often, the children who do care for them are
tempted to dip into their parents' savings before they die because
they figure it's coming to them eventually.
Self-interest works both ways. Often, aging parents dangle the
prospect of an inheritance to make sure their children will care for
them in their later years, Hartog says. "The best demographic evidence
we have suggests most parents distribute assets equally between
children," he says, adding that most don't like to play favorites,
even if one child did more for them.
Tangled family trees
Family feuds over inheritance are as old as the Bible (Jacob tricked
his twin brother Esau out of his birthright and their father's
blessing.), and they can multiply in blended families. There are
ex-wives and ex-husbands, children and stepchildren, parents and
stepparents.
More than half of all first marriages end in divorce and about 75% of
divorced people will marry again, according to the National Stepfamily
Resource Center. About 65% of these unions will include children from
previous marriages. More than 40% of American adults have at least one
step-relative, according to a Pew Research Center study earlier this
year.
Newcomers to the family can heighten tensions.
"The children of the mom might say, 'I never liked my mother's new
husband and now I might have to take care of him?' " Zenker says.
Boomers who started families later in life are feeling the pressure.
They are dealing with children's college bills "while Mom is 87 and
needs care," says Claudia Fine, chief professional officer at
SeniorBridge, which has more than tripled the number of its branches
in the USA since 2008 by helping families keep elders in their homes.
"It's no longer the sandwich generation; it's the panini generation,"
she says, referring to the popular pressed sandwich.
McGaw is feeling the squeeze. At 46, he has "only $40,000" in his
401(k), and he has credit card debt. He is married for the second
time. His wife also was married before. They each have two children
from their first marriages. Their ex-spouses both remarried to people
who were married before. The blending is multiplied.
"The thought of two of the kids (hers) having access to my assets even
though they have no interest in accepting me into the family" makes
him wince, he says.
McGaw would like everything to go to his children, but that doesn't
sit well with his current wife. He says she got upset when he met with
an estate attorney without her. McGaw is going ahead with his estate
planning on his own to make sure his children get what he thinks they
deserve.
"I love my wife, but I would not want to benefit her kids from a
previous marriage, especially in a scenario which left my children
with nothing," says McGaw, a senior analyst for a medical information
systems company in San Antonio. "It's almost morbid and perverse in a
way. It's an extremely stressful situation. … It's a mess."
After his father died, he says his sister ended up with the family
house without his knowledge — and that has caused resentment.
Even if you don't want it
Paula Goldie, 57, is a typical Baby Boomer who celebrated her 50th by
taking up scuba diving. She plans to learn the rumba for her 60th.
Goldie's married and has a 40-year-old stepdaughter, a 25-year-old
daughter and 20-year-old granddaughter. Her mother died 16 years ago,
but her father, 82, remarried. His wife, 67, has four adult children.
Goldie, a court clerk in the Portland, Ore., suburb of Troutdale, is
inheriting something she's not even sure she wants: Her father's house
1,000 miles away in Southern California.
"He has left me on his house title," she says. "My younger brother
(who lives in Michigan) opted out, so it's up to me to handle Dad's
estate. Honestly, neither of us cares."
One problem: Her dad has a reverse mortgage, and he wants his wife to
stay in the house after he dies. Goldie wants to respect her father's
wishes but worries that she will be stuck spending money to allow his
widow to live there for free.
If the wife stays in the house, "she would have to pay taxes, but her
name is not on the house," Goldie says. "Her children have already
looked at the furniture in the house and said, 'Gee, I would like
that.' … The house is pretty much going to be a wreck. If he passes, I
still have to deal with it."
As much as she wishes she didn't have to, Goldie sees taking care of
the house as her duty and something her late mother would have wanted.
In the meantime, she has yet to draw up her own will.
Putting it off is "one of the things so many of us Baby Boomers are
facing," she says. "Death in the family brings out the best or the
worst in people. There's no gray area."
What to do?
There are no foolproof solutions to the wills problem, but talking the
issues out when parents are still alive can help. And planning is
crucial.
"If you cherish your family, you've got to plan," says Kotzer, who
runs an interactive website to help families deal with wills
(familyfight.com), even if they're not rich.
"Don't assume that people only fight over money," he says. "Many times
people fight over memories. It could be the painting on the wall over
the table in the hall."
Edward Gabriel, 67, is married (once) and has three children (all with
his wife) in their 30s and 40s. He admits that he put off drafting a
will but is finally doing it.
"My children say, 'Hey, it's your money, you do whatever you want with
it,' " says Gabriel, a manager at a financial processing firm in
Parsippany, N.J., who plans to retire this year. "But the older you
get, you want to make sure your children are taken care of."
He is making his daughter the executor of the estate and is trying to
divvy up assets equitably, leaving more to the kids who didn't borrow
his money. "It has to be done, like it or not," Gabriel says.
Hartog says heirs should remember that they are enjoying the fruits of
their parents' hard work long before they die.
"Children are effectively getting their inheritance much earlier —
their education, help buying their first business and their first
house," he says. "It makes more sense. Who wants to wait until they're
in their 70s?"
Advocates for seniors advise families to start planning when older
relatives show the first signs of health problems rather than waiting
until they have to be put in a care facility.
"Whenever it involves money, someone always feels that they're on the
short end of the stick," Jukel says. "There is no mathematical formula
for the distribution of wealth."
If there are three heirs, wills lawyer Kotzer suggests parents leave
it up to them to take what they want and tell them to resolve disputes
this way: When two of them want the same thing, flip a coin; when all
three want it, draw names from a hat.
"Everybody needs to plan because we're all going to die," Kotzer says.
"It's not if — but when."
For more information on these matters, please call our office at 305
548 5020, option 1.
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