An estimated $124 trillion in assets will transfer from older generations to younger heirs over the next couple of decades, but that windfall may create a storm of problems, according to new research.
A third of adult children believe inheritance is likely to create conflict among siblings, while nearly half (45%) say they have adjusted their behavior to stay in a parent's good graces for financial reasons, according to a report from personal finance site Kiplinger, in partnership with researcher Morning Consult. The online survey of more than 2,575 adults was fielded between May 28 and June 2.
The research highlights that inheritance isn't just about dollars and cents. It's also about the emotional complexity surrounding it and how different
parties on opposite sides of the "Great Wealth Transfer" perceive fairness, timing and entitlement.
"It's not about money," said Diane Harris, Kiplinger's deputy editor. Issues "pop up in families where there's just china and jewelry. It's more about the emotions tied to the money. It's the feelings of favoritism, parent inequality and what is fair or not and other past tensions that are tied to the money."
Are family tensions already here?
Family conflicts related to inheritance are already among the most common factors undermining wealth transfers. Approximately one-third of people 50 or older say they have experienced conflict in their family related to inheritance at the time of a loved one’s death, AARP research showed.
And Kiplinger's survey showed a third of adult children whose parents are still alive were already predicting conflicts with siblings.
Over the next decade, as mortality rates for baby boomers rise and their estates transition to their beneficiaries, the courts will be flooded in a "probate storm" of contested inheritance disputes, the American Bar Association said.
"When a parent dies, unresolved issues surface," said marriage and family therapist Maria Shufeldt, 69, who lives in South Pasadena, California and who dealt with family litigation after her mom passed. "Toads and snakes come out when there's a death in the community. Infrastructure through the parent falls."
What's the root of the inheritance conflicts?
Different perspectives between generations may be fueling hard feelings, Kiplinger's research showed.
Parents and children don't see eye-to-eye on how assets should be split, for example. While 71% of parents intend to divide assets equally, only about half of adult children expect or prefer that outcome, the study said. Kids generally prefer parents divvy up assets based on what's "fair," which doesn't necessarily mean "equal."
"Many more of the kids think the division should take into account fairness—that is, a division based on need. Maybe one kid's a kindergarten teacher and the other is a hedge fund manager," Harris said. "Or merit. Say, a daughter who was a caregiver for mom and dad might feel entitled to get more, or siblings might expect a child who got financial help from mom and dad while they were alive—say, the down payment for a house or help paying off student loans or credit card debt—to get less of an inheritance. This tension could certainly lead to conflict."
Inheritance timing is also a sticking point. Adult children (45%) prefer financial help now rather than a larger inheritance later (24%), but only 14% of parents would rather give now, Kiplinger said.
"There's tension between parents and kids because many more children want more help now than later." Harris said. "Boomers are seen as hoarding wealth while millennials and Gen Z struggle."
But one of five parents said they're willing to provide funds on an as-needed basis, and have, even if their kids may not remember it, the survey showed. Roughly a third (32%) of children said they've received financial help as needed from parents, but 46% of parents said they've provided their kids with necessary assistance.
Half of adult children (52%) said they could maintain their lifestyle without parental help, but a quarter (27%) would have to make some cutbacks and one-in-six (16%) could not, Kiplinger said.
How can families ease conflicts?
Deep-rooted sibling rivalries may be hard to overcome, but communication gives everyone the best shot at avoiding disputes, Harris said.
For example, "the biggest reason parents said they couldn’t help their children now is because they're uncertain they have enough money for the rest of their life," Harris said.
Nearly a third (29%) of parents worry inflation and other economic pressures will erode their wealth, and a quarter (24%) stress about affording long-term care, the survey showed. Another 12% worry about eventually having to rely financially on their kids.
"It would help if parents explained their uncertainty – I would love to help more but worry if I have enough money to live the rest of my life," Harris said. "It's important children know they're not hoarding, sitting on a pile of money, but they have concerns. It's helpful because it gives them (children) perspective."
Parents should also explain to children how they plan to divide assets, especially if they plan to split them unequally, Harris said.
"I do not advocate sharing numbers, but share the sentiment of how you're divding money because surprises are bad," she said. "Children will fill in the reasons for you if they don’t know what the reason is, and they'll almost always fill it in negatively because of emotions and childhood hurts. All that stuff bubbles up."
Since Shufeldt said she also believes conflicts aren't usually about money, she believes family therapy should be required after a parental death.
A therapist "can pull out what is unresolved with all of you and your siblings with the passage of a parent so as not to blow the family apart and get things out in the open," she said.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Money can cause family strife. That's why parents must talk about it
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