Arizona generations begin transferring wealth

Local baby boomers at forefront of trillions in moves


Today's baby boomers are at the forefront of the biggest intergenerational wealth transfer in history, and it's going to have a big impact in the Phoenix area.

As that generation, born between 1946 and 1964, ages, many will be transferring a lifetime of accumulated wealth to their children. And finger pointing and family disputes can arise when people have question marks about their future.

That notion is especially true when a loved one passes away without a financial plan of exactly where they want their money to go - an issue that can be avoided, according to Jason Miller of BMO Wealth Management in Scottsdale.

Mr. Miller, managing director at BMO Wealth Management in Scottsdale, said he’s seen a trend where baby boomers are passing away and leaving wealth to their children who might not necessarily know what steps to take next.

“You see the good, the bad and the ugly that comes along with that,” Mr. Miller said.

In the coming years, it’s estimated that more than $68 trillion will transfer from baby boomers to their children as part of one of the largest wealth transfers in history. The Valley could be primed for some of those transfers with large populations of retired baby boomers now living in areas such as Sun City, Sun City West and Surprise.

Roughly 695,000 people in the Valley are age 65 and older, with many being baby boomers. Even more are younger, with the age range stretching back to those currently between ages 57 and 74. It means estate planners will be busy in the coming years.

With such a large baby boomer population, local estates and inheritances could be tied up in probate court in a process that could last years, if the proper steps aren’t followed, Mr. Miller said.

“That’s precisely what we want to avoid,” Mr. Miller said. “Settling an estate is complex. There are a lot of moving parts. People don’t do that as a profession. They can’t be expected to settle an estate properly.”

According to Forbes, Millennials and those in Generation X will inherit trillions by 2030 - one of the greatest wealth transfers in history.

“The difference between the millionaires of the early 1980s and the ones being created today is that many of them stand to inherit even more wealth from their baby boomer parents, who are considered the wealthiest generation in history,” the article said.

A report by professional services firm Deloitte found that net worth in the U.S. will grow from $72 trillion overall in 2015 to more than $120 trillion by 2030. Baby boomers, one of the largest generations ever in the U.S., will still hold about 44.5% of that wealth at that time.

However, a sizable portion of that wealth will be passed to Gen Xers, those people born between 1965 and 1980, whose share of the national wealth will increase from 14% in 2015 to 31% by 2030, according to the Deloitte report

Mr. Miller said most beneficiaries don’t realize the liability involved with wealth transfer. Executors of wills might have to deal with everything from the inventory of assets to figuring out different laws for different states.

“(Being named an executor) feels like an honor at the time,” Mr. Miller said. “In reality, it can be a burden.”

The managing director said simple personal effects to millions of dollars of inheritance can raise tensions between siblings and other family members after a death in the family.

“Emotions can run high,” Mr. Miller said. “It’s difficult. Ideally, you wouldn’t want the process to effect family relationships. Unfortunately, it can.”

Mr. Miller recommends getting ahead and doing research about what options are out there well before a family member passes away. Then, clients can have a common set of expectations when something unexpected happens.

Jeff Katz, owner  at Sun Cities Financial Group,  said the beneficiary should develop a plan based on what their financial goals happen to be. 

He said CDs of different types can be an option for people wanting to grow their money.

"They should have a plan to meet that goal with safety in mind," Mr. Katz said. 

In the meantime, Mr. Katz said, consistent saving habits will help if a wealth transfer happens down the road. He stressed the importance of paying yourself first.

"When you are in your working career, put that money away first," Katz said. "You are paying yourself first. Then, you pay your bills." 

Mr. Miller said in some cases, BMO can work with families for generations to help plan for the future.

“The last thing that you want to do is to be caught off guard.”