The Allianz American Legacies Study

During the next several decades, over $25 trillion will be passed from one generation to the next—the largest intergenerational wealth transfer in history and one of the most crucial untapped opportunities in the financial services industry. Inheritance is an increasingly vital piece of family financial planning. Yet divorces, remarriages, and children from multiple spouses have made the process of inheritance increasingly challenging. Moreover, among most families, the subject of the passing of a legacy and inheritance is difficult to discuss. Both the elder parents and adult children have little idea how to even broach the topic. As a result, for many families, the process of inheritance will be rife with misunderstandings and conflicts that are both emotionally and financially costly.

In order to understand the emotional and financial challenges of today’s legacy transfers and how best to overcome them, in 2005 Age Wave collaborated with Allianz Life Insurance Company of North America and Harris Interactive to conduct the most comprehensive study on intergenerational wealth transfer ever. The Allianz American Legacies Study asked 2,627 people—boomers and elders—to identify how they define leaving a legacy and how families are communicating about these sensitive issues today. Among the key findings were:

• Financial inheritance is just one part of intergenerational transfer. The Allianz American Legacies Study revealed that there are actually four pillars of legacy: (1) values and life lessons, (2) personal possessions of emotional value, (3) wishes and directions to be fulfilled, and (4) financial assets/real estate.
• Financial assets are not the most important of the four pillars. In fact, nonfinancial leave-behinds—like ethics, morality, faith, and religion—are 10 times more important to both boomers and elder parents than financial aspects.
• Inheritance isn’t a given. Elders (22%) are 7 times more likely than boomers (3%) to believe they owe their children an inheritance.
• The majority of families haven’t yet discussed legacy planning. The majority of boomers (68%) and elders (71%) say they feel highly confident discussing key elements of inheritance and legacy planning issues, yet only around one-third (29%) of boomers and elders (31%) have actually done so with their own families.
• Money isn’t the greatest source of conflict for families. Fulfilling last wishes and distributing personal possessions are 5 times more likely to be the greatest source of family conflict during a legacy transfer than the distribution of finances.
• Many elders rely more heavily on an “alpha child.” Two in five elders say they have an “alpha child,” defined as the child they turn to first. The alpha child is a leading resource for financial professionals discussing legacy issues with elders, as the alpha child is twice as likely as his or her siblings to have discussed all four pillars of legacy with elder parents.