Bob Moon: Have you noticed more and more adults are “skiing” these days? Let me explain, because somebody came up with that term as shorthand for a new phenomenon. The “S-K-I-ing” in this case would be short for “Spending the Kids’ Inheritance.” A recent survey (PDF) by the investment firm U.S. Trust found that fewer adults are bequeathing money to their children.
Boston University Finance Professor Zvi Bodie is with us to talk about this. Welcome.
Zvi Bodie: It’s a pleasure to be here, Bob.
Moon: Doesn’t it sort of stand things on its head that this is a generation that has been one of the richest, really, and is not leaving much behind?
Bodie: Well, I don’t quite agree with that. You know, I have two daughters, my wife and I have two daughters. We’ve put them through college, we paid for graduate education. I think in a way, we’ve given their bequest — if you want to call it that — while we’re still alive. And we can enjoy seeing them benefit from it.
Moon: So in other words, instead of getting an inheritance, you’re sorta getting a cash advance.
Bodie: That’s a good way of putting it, yeah.
Moon: And is that going to be the trend for future generations, do you think?
Bodie: Let’s bear in mind that the current norms for bequests in, let’s say, the developed countries of the world is rather recent in terms of human history and even pre-history. You know, the traditional family was one where you had children, you took care of them when they were young. They took care of you when you got old. That was the way ti worked.
Moon: So parents aren’t maybe consciously denying their inheritance, but boomers are staying active longer than their forebearers, they’re taken care of, parents’ lives have been extended by medical science and they’re just spending away more?
Bodie: Exactly. They’re stretched to the limit, and my personal view, I mean, call me cock-eyed optimist, I see the kind of the silver lining here in that I think there are going to be a lot of job opportunities, career opportunities for boomers to stay in the work force on at least a part-time basis. And to me, personally, I’m 68, I’m still working full-time, but I love my work and you know, I have no intention of retiring. I think there are a lot of people like me out there.
Moon: I have to confess that I’ve never once anticipated an inheritance. I’d even told my parents, “Spend it, that’s yours.”
Bodie: Yeah, and I did the same thing. I think a lot of bequests are essentially by accident.
Moon: It might make good sense to talk about it early on, but it’s still awkward. How do you do that, how do you approach it from the parents’ standpoint or the child’s standpoint?
Bodie: I agree. It is uncomfortable and that’s why I think the best way to bring it up is in the context of just knowing where the information is. Where do you keep the records? And making sure that whenever the inevitable final date arrives, the people who are left behind are able to locate all the assets.
Moon: And if you don’t feel comfortable bringing it up, at least leave a good paper trail, huh?
Bodie: Exactly right.
Moon: Zvi Bodie is a professor of finance and economics at Boston University. Thank you very much for your insights.
Bodie: You’re welcome. Thanks.
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