Authored by: Roy P. Kozupsky, Esq.
It is always interesting to follow important trends in how affluent families think about their wealth and plan for how it is transferred to the next generation. Thus, a recent study by U.S. Trust* is important to take note of. The nationwide survey studied 450 affluent families with $3 million or more in investible assets (excluding the primary residence). Detailed below are some of the more interesting findings.
LESSONS TO BE LEARNED: HARD WORK PAYS OFF!
Over three-fourths of those studied accumulated their wealth through earned income from their occupation. Only a minority of respondents (27%) earned their wealth from an inheritance. 84% of respondents believe that their wealth is a result focus and hard work.
THE PRICE OF AFFLUENCE
Among those respondents who said that there was negative consequence(s) to their personal accumulation of wealth, some interesting responses stand out. 66% said that they do not take enough time off from work and 26% (among those who feel that there was a negative consequence to the accumulation of wealth) thought that their physical health suffers!
AFFLUENCE & ESTATE PLANNING
It is interesting to note that despite all that is written about in the media about estate planning (including the recent generous concessions to the affluent when it comes to the estate tax exemption), there remains some alarming responses among respondents. For instance, 39% of respondents acknowledge that they do not have a comprehensive estate plan. Somewhat surprisingly the study noted the following about the use of more sophisticated estate planning instruments that are used to mitigate taxes and pass wealth to the next generation: 78% do not have a life insurance trust, 72% do not have an irrevocable trust established and most alarming 97% of respondents who are business owners have no succession plan in place! Obvioulsy, attorneys need to do a better job of educating our affluent clients about the importance of these estate planning instruments and how such planning instruments can positivley impact their families.
AGE OF FINANCIAL MATURITY
All estate planning attorneys are relentless asked their opinion(s) by clients as to when it is appropriate to let children (heirs) be responsible for the money that they will eventually inherit. Of course, without the attorney spending time with the client to get a better understanding for the values and fabric of the family and a thorough understanding of the needs and maturity levels of the children, the question in almost impossible to address. Nonetheless, the survey noted the following findings: