Many individuals saving for their retirement are electing to either spend their money or give it away to heirs during their lifetimes rather than have it transferred through a will, according to several advisors.
The advisors say part of the reason for this is that clients want to experience the joy of having wealth—and sharing it with others.
“It’s more about the moments and experiences that they can create with their heirs, with their children, and with their grandchildren now and less about the dollar amount that they’re going to leave them,” said Jaymon Meikle, a wealth advisor at St. Joseph, Mo.-based Gertsema Wealth Advisors.
While some clients are looking to share those experiences with their children during their lifetime, others want to just spend it on themselves and worry less about what they leave behind, advisors say.
“More and more folks are traveling more and they’re also talking about spending down their assets more instead of focusing on their legacy,” said David Tam, a financial advisor at Edward Jones. “[I'm] definitely seeing a trend in utilizing their wealth during their lifetime.”
Over the past three years, he has had clients change their beneficiaries or donate to charities now as opposed to waiting until after they die to pass along their inheritance.
“They want to feel that fulfillment while they’re alive versus having that wealth go to beneficiaries or go to charities after they pass,” Tam said.
Some clients wait to decide whether to give an inheritance to their children so they can observe the kids’ work ethic, said Donnie LaGrange, wealth manager with Murphy & Sylvest Wealth Management in Dallas.
He has clients who will share their inheritance with their children if the kids have worked hard and need financial help. The clients are less inclined to reward those children who they perceive as lazy, LaGrange said.
However, he adds that “laziness” is a matter of perspective, since the work style of baby boomers is different from that of Generation Y. The younger generation may not have a real career but instead several side hustles. The boomers see that as being lazy or not contributing and they have a difficult time relating, LaGrange said.
“It doesn’t match their own experiences very well,” he said. “So, in those cases, we definitely see the parents deciding not to help fund college when they otherwise would.”
Meikle said that some of his clients do not want to give too much to their children because they do not want them getting rich off their inheritance.
Some of these advisors say the pandemic has changed attitudes: After everyone could leave their homes again, they began spending more aggressively and realized the importance of seizing the moment and not letting it go to waste.
“I think everyone being locked up ... for a while has led to this,” LaGrange said. “Covid moved the needle to this more experiential lifestyle as the goal instead of [the perfect house].”
A clearer financial picture has also influenced clients’ desire to spend. Crystal McKeon, a chief compliance officer with Houston-based TSA Wealth Management, said that more people are seeking help from financial advisors and developing a financial plan.
“Financial planning has been a lot more at the forefront the last couple of years than it had been in previous years, and I think that provided people some comfort in knowing that they’re not going to run out of money, and they can share this,” she said.
While the end goal may have changed, financial advisors’ obligation has not, advisors say. They still need to work with their clients to understand what the clients’ goals are—and make sure the clients have the savings to accomplish those goals, whether it’s to spend money on experiences with the family or spend money on themselves.
And the advisor should put the client first in those scenarios, before children or elaborate family vacations, said Christopher Cybulski, a financial planner at Round Rock, Texas-based Chisholm Trail Financial Group.
“I make sure they focus on themselves before they focus on adding experiences, or things [such as] helping family, because they ultimately don’t want to be a drag on their family members,” he said. “We make sure any money they get is set aside to take care of them first.”