Are You Spending Your Kids Inheritance?
Due to demographic changes and changing economic fortunes, older Americans increasingly have to transfer money to their adult children so that their offspring can support their families. Barron’s, in a recent article titled “Boomers Spend Their Kids’ Inheritance – On Supporting Them,” reports that intra-family transfers have increased significantly in the last few years. Nearly one-third of baby boomers support either minor or adult children.
Along with supporting often adult children, boomers are being faced with health-care costs that are constantly on the rise. On top of providing for a child they thought would be able to comfortably support themselves, the older generation of America is forking over more money year after year to simply take care of themselves – so they can continue to support their children in a demanding economy.
Also, as the boomers age, they will be tapping into retirement funds rather than adding to their investment accounts, leaving a smaller pool of savings to be funneled into the financial markets. This trend of older Americans supporting their grown children could not only affect personal 401(k)’s, but the economy as a whole.
For estate planning purposes, this trend could create some issues. If the money is being spent now, then it obviously cannot be part of the estate later; children might receive smaller inheritances than they are expecting. Because of this, children might not be able to afford the bigger house they were planning on to accommodate their ever-growing family.
Furthermore, what if one child receives more support from the parents while they were alive than another child? This could lead to bitterness and even fighting over the estate between the children. This is likely to happen if the estate plan divides what is left between the children equally, even though one or more children received money along the way.
If you’re a parent that is helping to support your adult children now, call us at 918-493-3360 to discuss what that means for your estate plan. No parent wants to be remembered as the cause of a family feud.