Observations on the U.S. Trust Annual Wealth Survey

U.S. Trust conducts an annual survey of high net worth individuals to prepare a comprehensive report it calls the “Insights on Wealth and Worth” (“Survey”).  While there are many fascinating observations and conclusions that may be drawn from the 2014 Survey, we have highlighted a few below that have a direct bearing on our practice and the planning work we conduct for families.

It is common knowledge that family members nowadays tend to live father apart geographically than they used to.  However, you might not appreciate just how much families are still well connected financially.  Approximately 25% of adult children have financially supported their parents or in-laws and nearly 60% have provided financial support to an adult member of their immediate and extended family (other than their spouse).  We don’t know how many of those surveyed anticipated that need to provide financial support to their parents or other loved ones.  But it certainly should be a part of the planning conversation, since 37% of those surveyed reported that providing financial support to others came at the expense of meeting their own personal financial goals.

Amongst those surveyed, nearly half reported that they have experienced a major disruption in family dynamics.  The most commonly cited circumstances include addiction or impulsive behavior, the untimely death or disability of an income earner, divorce, a medical crisis, and/or a disagreement over inheritance or the distribution of family assets.  From our perspective we can confidently note that every single one of those circumstances are possibilities we strive to address in the planning we do for families! 

Despite the frequency with which so many families are forced to confront the crises referenced above, most are still not properly planning ahead to address the possibility of adverse circumstances.  Only 38% of married couples have a financial plan to address the cost of long-term care for both themselves and their spouses.  Just one in 10 have established a financial plan to address the cost of long-term care for their parents or other aging relatives, should they need it.

When the surveyed parents were asked the age at which they believe their children will have the maturity necessary to handle money left to them as an inheritance, few thought their children would be sufficiently mature before age 25 and roughly 60% believed their children would need to be 25 to 34 years old.  Amongst surveyed parents over the age of 69, 4% of those older parents thought their children would not be mature enough until age 40!  Maturity comes with age and experience and we often counsel parents to be prudent and not to overestimate the limited life experience their young adult or even middle aged children have had.

Amongst surveyed business owners, two thirds have no formal succession plan for their business.  The most commonly cited reason for not having a plan was premised on having no intention to retire any time soon.  Yet when U.S. Trust sorted the responses by age, they found the highest percentage of business owners without a succession plan was those over the age of 50.  We would say those business owners are closer to retirement than they would care to admit!  Furthermore, as we referenced above, health problems and financial crises are rarely anticipated and business owners are certainly not immune to either.  We find all too often that business owners who believe their family will simply sort it all out after they have passed are sorely mistaken if they believe conflicts will not arise and the business will simply continue.

Please call us at 860-769-6938 if you have any questions about the issues presented above or if you care to discuss any other planning issues with us.

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