Andrew Aran has accumulated a significant amount of wealth as a registered investment advisor. But when he passes away, his three children—now 26, 22 and 16—will not see a large inheritance.
Aran, 57, and his wife, who live in Wyckoff, New Jersey, plan to gift the bulk of their estate to charity, with only a small portion going to his children.
"We don't want to negatively impact their work ethic," Aran said.
A 2014 study from the Boston College Center on Wealth and Philanthropy projects that $36 trillion will be passed down from boomer estates to heirs between 2007 and 2061 (the total wealth transfer broader than estates will reach $59 trillion). But that's not necessarily going to be the windfall the children of boomers—the Gen X- and Gen Yers—expect.
A 2014 U.S. Trust Wealth and Worth survey found that baby boomers are less likely than any other generation to believe it is important to leave an inheritance to their heirs. While 53 percent of boomers feel it's important to leave a financial inheritance, that number is 68 percent for those over the age of 69.
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That's because a heavy percentage of the survey participants were first-generation wealthy and feel their children should earn their own money just like they did, said Chris Heilmann, chief fiduciary executive of U.S. Trust.
The most famous—and richest—proponent of this approach to inheritance is Warren Buffett, who created the Giving Pledge to convince more of the world's ultrarich to leave a majority of their fortunes to nonprofits rather than family.
Buffett was famously quoted saying, "My family won't receive huge amounts of my net worth. That doesn't mean they'll get nothing. My children have already received some money from me and Susie and will receive more. I still believe in the philosophy ... that a very rich person should leave his kids enough to do anything but not enough to do nothing."
As a generation of activists, many boomers are interested in leaving a philanthropic legacy.
Mitchell Kraus, a financial advisor with Capital Intelligence Associates, said many parents of boomers don't talk about money in terms of what is important to their value system and that the boomer generation has more causes and tries to pass down values and assets in a different way. Aran said that while his children "didn't shout for joy" when they learned about his decision, he feels strongly about using his financial prosperity to help worthwhile efforts.
Craig Wolfe, 61, who lives in San Rafael, California, has a net worth between $3 million and $4 million—amassed as owner of CelebriDucks, the largest custom collectible rubber duck manufacturer.
He says his daughter is financially comfortable, doesn't need an inheritance and is supportive of his decision to give most of his money to nonprofits. He didn't anticipate becoming wealthy and feels an obligation to give back.
"The thought that it can go to help others makes me sleep a lot better at night," Wolfe said.
Dan Rothblatt, senior vice president of philanthropic services for The Jewish Community Foundation of Los Angeles, who advises boomers, said many find philanthropy adds meaning to their lives, and in ways that often depart from priorities of their children.
Not every boomer has the luxury of a dilemma over how to parcel out the wealth of a lifetime, because many don't live within their means, said Nicole Mayer, a partner at holistic financial planning firm Life Transition Specialists.
Mayer knows of boomers who, instead of paying more for their aging parents' medical care, are, in fact, banking on a hefty inheritance from their parents to help finance their retirement. For many years, she said, boomers had secure jobs and lived by the mantra, "The bigger, the better," spending money on large houses, intent on having more than their parents, Mayer said.
Boomers—who grew up in the aftermath of the Cold War, global uncertainty and rising inflation—had an attitude of "Spend it now because it will be more expensive later or we won't be here later," said Leon C. LaBrecque, CEO of wealth management firm LJPR.
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Now, even basic expenses, such as health care, will tap into their lifetime accumulation of wealth. To that point, 50 percent of all medical expenses are spent in the last five years of your life. And with life expectancy as high as 85, "you've added five of the most expensive years of your life," LaBrecque said.
Michael H. Baker, a certified financial planner with Vertex Capital Advisors, said boomers' parents, who lived through the Great Depression, were world-class savers. They also had the advantage of a defined benefit pension plan rather than a 401(k). Baker said leaving an inheritance to children is at the bottom of the list for many of his boomer clients.
Boomers are also spending more, and for a longer period of time, to launch their kids into adult life. Mayer points to President Obama's decision to allow a child to stay on a parent's health insurance—with Mom and Dad footing the bill—until they're 26. Young adults may move back home and lean on their parents for financial support as they struggle to find jobs.
"Many of my clients have given their kids a lot of money already, from helping them buy a home to basic handouts," said Keith Singer, a certified financial planner at Singer Wealth Management.
Heilmann of U.S. Trust said survey respondents ranked having fun as one of the most important uses of wealth.
"Baby boomers are choosing to prioritize their personal enjoyment over the financial legacy they will eventually leave," claimed Peter Hubbell, founder and CEO of BoomAgers, an advertising and marketing company focused on boomers.
"They are using retirement as a catalyst to redefine their lives," he said. "They are traveling, starting businesses and pursuing the dreams and goals they have always wanted to pursue."
This is a priority for Denise Marchese, a 62-year-old retiree living in Lakeland, Florida, and her husband. "We have worked hard, and for a long time, to enjoy this part of our lives," she said. "We just purchased a house on a large piece of land in our dream location and travel quite frequently. Our children may inherit some money if, at the end of both of our lives, there is some left."
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Marty L. Oblasser, an estate-planning attorney with Corthell and King in Laramie, Wyoming, said boomers are forced to balance the considerations of charitable giving, the potential for long-term care, spending their resources on hobbies and interests and leaving their estates to their respective heirs.
"Most baby boomers are concerned with leaving their children an inheritance. It just may not be as large of a distribution as the child may expect," he said.
It's too soon to tell precisely how much boomers will pass on to their heirs, since it will be another 15 years before this group starts to die en masse, said Laurence Kotlikoff, a professor of economics at Boston University. But his research shows that though boomers have accumulated less than their parents, they seem determined to spend what they have and not leave it to their children.
Mitchell adds that the Gen X- and Gen Yers, already burdened by college debt and a fragile economy, "will have to face an era of diminished expectations" when it comes to getting a big chunk of money from Mom and Dad.
What they hopefully do inherit from their parents—and will likely need—is the same thing Buffett has said all along: a strong work ethic.
—By Julie Halpert, special to CNBC.com