Canada's Condominium Magazine
For as long as humans have owned property and created families, there has been a strong understanding between parents and children that the property would be passed along from generation to generation. Now there is research from several different sources that indicates that today’s younger adults and their parents may not necessarily be on the same page when it comes to the big I: Inheritance.
While 75 per cent of British adults aged twenty to thirty-five “expect” to receive an average nest egg of about $133,000 when their parents die, the parents have different ideas. More than one-third of parents (37 per cent) indicated that they intended to spend all their money during retirement and would have nothing left to pass on. In fact, almost half of the parents of children aged twenty and older have already had to “dip into” their savings just to get by. The research was carried out by the Skipton Building Society, whose spokesperson said rather wryly, “It really is a high risk strategy for people to be resting their financial hopes on estimating their parents’ wealth and then assuming it will all be coming their way.” Put that way, it seems just a little more sensible than relying on lottery winnings.
Here in Canada, a bank that specialises in the financial needs of senior citizens, HomEquity Bank, also studied seniors’ views concerning inheritances. The main result is quite similar to the British finding: 86 per cent of Canadians over the age of fifty-five said they would not forego “doing, achieving or acquiring” something—A new car? A luxury vacation?—just to provide a larger inheritance for their adult children. Putting it more explicitly, 62 per cent of Canadians over the age of fifty-five, and 71 per cent of those older than sixty-five, said they are “not very concerned” about how much inheritance they leave. Their own needs and wants come first, even though 19 per cent of Canadians over fifty-five still have a child who depends on them financially.
Seniors are not feeling pressured about leaving an inheritance. They’re very comfortable with wanting to enjoy their retirement. And, with the majority of our clients, they know there will still be an inheritance that will go to their children. In fact, on average, our clients have more than 50 per cent of the equity left in their homes at the time of sale.
A HomEquity SVP, Yvonne Ziomecki, commented on this spend-it-while-you-can attitude of seniors: “They’re very comfortable with wanting to enjoy their retirement.” So much so that household spending by seniors couples increased faster than for any other demographic (4.7 per cent) during the years 1997 to 2002.
Is this new seniors recklessness in any way related to the rapid growth in home prices over the past decade or so? It is! These Canadian seniors have built a lot of equity in their homes as home values have increased “dramatically,” and they see no reason not to access this equity to “enhance their golden years.”
Ms Ziomecki added that the majority of her bank’s clients would in fact still be in a position to leave their children an inheritance of some size. On average, she said, clients have more than 50 per cent equity in their homes when the time comes to sell.