Don’t Just Pass the Buck—Protect It from Being Squandered

Did you know that a staggering 90% of inherited wealth is gone by the third generation?

A friend recently shared that he had inherited $500,000 just before the pandemic. His mother never spoke to him about money and he was surprised there was an estate to divide. Unfortunately, because he was so unprepared, the money is now depleted 5 years later. 

The great wealth transfer is well underway. Aging baby boomers–the eldest who turns 79 this year–will collectively give their heirs trillions of dollars over the next several years. Many aren’t waiting until their passing. The “Bank of Mom and Dad” is increasingly funding home purchases, education, and even lifestyle upgrades. In fact, the Chartered Professional Accountants of Canada estimates that $1 trillion will have transferred from one generation to the next between 2023 and 2026.

While receiving a substantial inheritance can provide a significant financial boost, history shows that these windfalls are not always managed wisely. Stories abound of heirs who quickly squander their inheritance through lavish spending, poor investment decisions, or a lack of financial literacy.

Over the years, I’ve heard a wide range of views when it comes to leaving money behind. Here are just a few examples that illustrate the complexity of this issue:

• “I’ve decided to donate it all to charity. That’s too much to leave to one guy.”
• “I can’t worry about what happens to my money after I’m gone. Once I’m dead, who cares?”
• “I worry–and I do mean worry–that all I’ve saved will disappear because of taxes.”
• “I want my last dollar to be spent on the nail that gets hammered into my casket.”
• “They’ll never be able to afford to live in this city without the money in this portfolio.”
• “I want to leave enough for my children so they do something, but not so much that they do nothing.”

Others, however, never mention the topic and assume their heirs will properly manage their inheritance.

What happens after money is transferred is often overlooked. Too many people—like the man I mentioned earlier—are caught off guard by sudden wealth, and it can disappear faster than expected.

At Schneider & Pollock, we understand that not every parent feels equipped or has the time to provide in-depth financial education to their children. If you’re concerned about preparing your children for the financial realities ahead, we’re here to help. Whether it’s one generation or three, we help every family member follow a clear plan—built with your values in mind—to manage both current finances and future inheritances responsibly. For example, one of our relationships involves managing the portfolios for three generations of the same family. This includes regular check-ins with every person on the family tree. Because we know the full picture, we’re able to offer long-term, generational advice. 

Let’s make sure the next generation doesn’t just receive wealth, but also the wisdom to protect it.

-written by Jeff Pollock