U.S. Trust Insights on Wealth and Worth Survey Finds Baby Boomers Mixed on Wealth Transfer to Next Generation

NEW YORK--(BUSINESS WIRE)-- Fewer than half (49 percent) of very wealthy parents in a nationwide survey published today said it is important to leave a financial inheritance to the next generation even though they consider the success of their children to be one of the most important measures of their own success, according to U.S. TrustInsights on Wealth and Worth. Given their wealth, surprisingly few of those surveyed have well-developed plans to preserve and pass on their assets to either their children or charity, raising questions about the planning process itself and what will become of what has been expected to be history’s largest transfer of wealth.

U.S. Trust Insights on Wealth and Worth is based on an independent, nationwide survey conducted January through February of 2011 of 457 high net worth and ultra high net worth individuals with $3 million or more in investable assets. The survey found a distinct generational mindset among the currently wealthy, many of whom are baby boomers and are self-made, first-generation wealthy who achieved financial success on their own. They are just beginning to enter retirement but show no signs of slowing down. The survey found:

Three quarters of those surveyed said their wealth is the result of their own focus and hard work, with approximately half saying that their success came at the expense of their personal lives, relationships and even their own health, for the primary purpose of providing financial security for their family.
In retirement, nearly half (46 percent) of the survey respondents said they will continue working, many starting a second career or new business, and 55 percent intend to actively volunteer in their community.
Having worked hard for financial security and freedom, the survey respondents now want to be able to travel and focus on relationships, placing a higher level of importance on these goals than on leaving an inheritance to their children or making a positive impact on society.
Wealthy Americans are more interested in giving back by volunteering in their communities and seeing the impact of their goodwill now, rather than leaving a legacy for after they are gone; approximately four in 10 have never sought professional advice about legacy planning or philanthropic strategies.

“There is an expectation about the wealthy that they have an implicit, sacred responsibility to pass down their fortune to the next generation, and this understanding has shaped expectations about the coming wave of intergenerational wealth transfer,” said Sallie Krawcheck, president of Bank of America Global Wealth and Investment Management. “Our research, however, uncovered a distinct generational mindset that reflects changing views about what retirement means and an evolving sense of what one generation owes the next. Wealth managers need to recognize these distinctions in order to connect meaningfully with both current and future clients.”

Insufficient estate plans

U.S. Trust found that many of the high net worth individuals surveyed have only basic financial and estate plans that may have sufficed at some point in their lives, but do not reflect the current complexity of their financial lives. Nor do their plans adequately account for unexpected factors that could wipe out a large portion of their assets.

While 88 percent of the wealthy have an estate plan in place, nearly four in 10 (39 percent) acknowledge that their estate plans are not comprehensive.
Most of their estate plans contain basic elements such as a will and beneficiary designations for insurance and retirement savings, but more sophisticated tools such as trusts are underutilized, despite their value in preserving family wealth and passing on legacy wishes. Nearly half (48 percent) of wealthy individuals surveyed have not established a revocable trust, and seven in 10 (72 percent) have no irrevocable trust, either. Three quarters (78 percent) do not have a life insurance trust and nearly nine in 10 (88 percent) have not established a charitable trust.
Four in 10 (43 percent) do not have a financial plan that factors in the impact of long-term care and/or end-of-life healthcare costs on family wealth. Six in 10 (62 percent) have no plan in place to care for aging relatives.
One in 10 (11 percent) has never discussed tax planning with their advisor, even though only one in three people surveyed strongly agrees that their investment portfolio is structured to minimize the impact of taxes.
Only 3 percent of wealthy entrepreneur business owners have a business succession plan in place.
Nearly half (46 percent) do not strongly agree that they understand all the elements of their estate plan.
Fifty-six percent have not documented personal property and assets, and half (51 percent) have not documented instructions about the distribution of personal possessions among heirs, often a source of family conflict and heartache in the settlement of estates.

“We have found a significant dichotomy between clients we talk with, who tell us that intergenerational wealth transfer is the single most important issue on their minds, and a large segment of high net worth population we surveyed, who are not taking action and therefore leaving the legacy of their life’s work to chance,” said U.S. Trust President Keith Banks.

Next-generation heirs are not well-prepared

U.S. Trust found that many children of these first-generation wealthy families are not receiving the guidance and support they need to handle either the emotional aspects or financial responsibilities associated with family wealth. Among wealthy parents surveyed:

Only about one third (34 percent) strongly agree that their children will be able to handle any inheritance they plan to leave them.
Nearly half (45 percent) do not believe their children will reach a level of financial maturity to handle the family money they will inherit until they are at least 35 years old.
About half (52 percent) of parents surveyed have not fully disclosed their wealth to their children, and 15 percent have disclosed nothing about the family wealth. When asked why they haven’t, one in three (31 percent) parents said they had never thought to do it.

Other reasons cited were fear that their children would become lazy (24 percent); would make poor decisions (20 percent); would squander money (20 percent); or would be taken advantage of by other people (13 percent).

Though 84 percent of parents think their children would benefit from discussions with a financial professional, nearly six in 10 (59 percent) have never introduced their children to the professionals managing their financial affairs.

Broadening the definition of wealth management

The survey confirmed that high net worth individuals are taking many of the right actions to manage their money and are talking with advisors about their investments and the technical aspects of wealth management, but they are not addressing the more complex, human and emotional factors that influence the management and use of their wealth.

Twenty-seven percent of respondents have never discussed intergenerational wealth transfer with their advisor, and one in three respondents has never discussed the expectations of next-generation heirs.
One half has never discussed ways of teaching children to handle wealth responsibly.
Thirty-seven percent have never discussed legacy goals.
Forty-four percent have never discussed philanthropic strategy.

One reason many people may not be doing all they should to update their plans is that four in 10 do not consider themselves to be wealthy, a term U.S. Trust found to be relative among survey respondents, depending on their individual expectations and goals. Nearly all (95 percent) respondents said they have a clearly defined set of personal goals for the way they want to use their wealth, but only about half strongly agree that their advisor understands their values and goals, and 74 percent said they would like financial advice to proactively act on the goals that are most important to them.

Additional information about the 2011 U.S. Trust Insights on Wealth and Worth can be found at www.ustrust.com/survey</a>.

Survey Methodology

The U.S. Trust Insights on Wealth and Worth survey is based on a nationwide survey of 457 high net worth adults with $3 million or more in investable assets, not including the value of their primary residence. Twenty-seven percent have between $3 million and $5 million in investable assets, and 10 percent had more than $10 million. The survey was not of U.S. Trust clients, but rather a cross-section of U.S. adults. The survey was conducted online by the independent research firm Phoenix Research International in January and February of 2011. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95 percent confidence level.

U.S. Trust, Bank of America Private Wealth Management

U.S. Trust, Bank of America Private Wealth Management is a leading private wealth management organization in the United States providing vast resources and customized solutions to help meet clients' wealth structuring, investment management, banking and credit needs. Clients can also benefit from access to resources available through Bank of America and its affiliates - including capital markets products, large and complex financing solutions, and its extensive retail banking platform. Clients are served by highly experienced advisors who provide a range of specialized family office services, including investments, single-stock management, integrated planning, philanthropic management, succession planning, specialty asset management, financial administration, compliance and family stewardship.

Bank of America

Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 58 million consumer and small business relationships with approximately 5,800 retail banking offices and approximately 18,000 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

U.S. Trust, Bank of America Private Wealth Management operates through Bank of America, N.A., and other subsidiaries of Bank o f America Corporation. Bank of America, N.A., Member FDIC.

www.bankofamerica.com