Leaving a Financial and Emotional Will

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Linda Wertheimer talks to Ken Dychtwald, president of Age Wave, on "leaving a legacy," which Dychtwald defines as both a financial and an ethical will. His study shows that heirs are more concerned with emotional issues regarding inheritance and family heirlooms, than with money.

LINDA WERTHEIMER, host:

A new study shows that the older generation of Americans is about to pass onto their children a staggering amount of money, possibly the largest transfer of wealth from one generation to another in this country's history. It's in the vicinity of $25 trillion. And according to the study commissioned by the Alliance Group of life insurance companies, the generations are not talking to each other about what ought to happen to that money. Perhaps even more interesting, people of both generations say it's not about the money. It's more likely to be about Mom's china or Dad's tackle box. To talk about what inheritance means to most people, we've asked Ken Dychtwald to join us. He's the president of Age Wave, which conducted the study.

Good morning.

Mr. KEN DYCHTWALD (Age Wave): It's great to be with you.

WERTHEIMER: Now your study shows that when it comes to inheritance, people are about five times more likely to get into fights with their siblings over personal items than they are to get into fights about money.

Mr. DYCHTWALD: Exactly. When deciding how the elements of one's life that had enormous emotional history and content, how that gets divided up, that was a very big issue for families, one the families often don't really talk about.

WERTHEIMER: Did you come across any clever ways of handling it?

Mr. DYCHTWALD: One solution is to talk about it. Ask your parents, `What's the legacy you'd like for your children and grandchildren and their children to remember you by? What are the things that mattered in your life?' A simple practical thing like discussing the properties that might get divided with the various children to find out who really wants what. And working out some kind of a reasonable path of action is likely to leave everybody feeling that they've been handled in a respectful way vs. letting it all be battled out after the passing of a loved one. That's no legacy to leave at all, to leave the kids sometimes battling for years.

WERTHEIMER: You know, parents have many times come to terms with the fact that they are at the end of their lives and they want things settled. Children do not want to think about their parents dying and keep putting them off and saying things, like, `Oh, Mother, you know you're going to live for a long time.'

Mr. DYCHTWALD: We thought that the boomers being sort of a self-help generation, that they'd be ready to talk, but the older generation would be the hold up. Turns out it was the opposite. We did find that the boomers had a great respect for their parents and really did want to be the recipients of their values in life lessons, their instructions and wishes to be fulfilled. By the way, the boomers put 10 times more weight on the importance of emotional issues than they did on the money.

WERTHEIMER: Now when it does come to money, though, it was interesting to see that most parents figure that their children should be treated equally, but a significant number want to apportion their wealth so that--Well, I mean, how could I say this?--the good child gets more than the bad child.

Mr. DYCHTWALD: You just said it. The way it played out was that most parents begin with the idea that everyone gets treated equally, but then they work from there. They begin to think, `OK, which of our children needs more help? Which of our children has looked after us?' And on the other end of the continuum, those kids that are the troublemakers, you know, that squander money, maybe they should get less. And so in a sense what you're seeing is that the elder generation is beginning to construct the kind of a performance-based distribution plan a little bit like an employer might do.

WERTHEIMER: But that's not a lot of people, is it?

Mr. DYCHTWALD: No, it's about half the generation of elders are now believing that the resources should not be shared equally. And also, we saw that about 8 percent of very rich people were inclined to disinherit a child. And the number one reason for disinheritance was drug addiction; more so even than if the child was in prison. And when we talked to people about that, they had a kind of a reasonable response. They said, `Look, we spent our entire lives working hard to gather up these resources. The last thing we want to do is to give it to a child who's going to squander it.'

WERTHEIMER: Thanks very much.

Mr. DYCHTWALD: Thank you.

WERTHEIMER: Ken Dychtwald is president of Age Wave, which conducted the study on legacy for Alliance Life.

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