Part One: Understanding the Great Wealth Transfer

by Wendy Wright, LMFT, Financial Therapist, Wealth Transfer Dynamics Specialist, Money Coach

This post is part one of a four-part series focused on wealth transfer and financial therapy. The vignettes featured in each post are fiction. All names and events are the products of the author’s imagination and used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.

 

Sarina’s hands trembled as she clutched the phone, stunned by the news she had just received. The lawyer’s voice was steady and professional, but she could barely grasp his words: She had inherited one million dollars. 

The weight of the announcement sank in slowly, each second stretching as her mind raced through possibilities. She looked around her modest apartment, imagining what this sudden windfall could mean for her future. Overwhelmed and elated, Sarina felt as though she was living in a dream. Her life just changed dramatically, and she struggled to process the enormity of it all.

Sarina just experienced a wealth transfer — one that was both unexpected and not discussed.

After this life-changing news, she is left to figure out her next steps on her own. And she’s not alone. In fact, over the next two decades, the biggest wave of wealth in history is going to pass from Baby Boomers in the United States, and it’s going to have major impacts on many facets of life. Called the Great Wealth Transfer, 84 trillion dollars is poised to move from older Americans to Gen X and millennials. According to Sallie Krawcheck, the CEO of Ellevest, women specifically are on their way to having the majority of wealth in America. 

To better understand this idea of wealth transfer, think about the popular Netflix show Bridgerton. Do you notice all of the money stories threading through each episode — or is that just me, your favorite money story nerd? These storylines are, in part, about the flow of generational wealth. Each character develops their own relationship with wealth and their own strategy for managing it. Some individuals must learn to handle wealth that they inherited and never imagined. On the flip side, some must learn to manage a lack of wealth, while others have to overcome the lack of avenues for building their own secure financial base.  

What comes up for you when you hear the word “wealth” or read about the Great Wealth Transfer? If you have mixed feelings or scattered thoughts, you’re in good company. Wealth is one of the most emotional money terms. And wealth transfer — well, you can probably tell by your reaction that it’s an emotional bucket full! According to recent research, 80 percent of recipients consider wealth to be a burden; 10 percent count it as a blessing; and 10 percent are undecided (Brandon Rains; The Rains Law Firm, LLC).

Let’s dig a little deeper into the concept of wealth.

Technically, wealth refers to plentiful resources, an abundance or overflow. When applied to finances, it means having more than enough. Note that I am purposefully not connecting this idea to dollar amounts. This post isn’t about math; instead, we are highlighting the mindset and emotions around wealth.  

If you’ve lived with a lifestyle and a mindset of scarcity — the belief that there is “never enough” — a wealth transfer can be incredibly hard to grasp. Suddenly, there is more than enough. Yet, your scarcity mindset, deeply ingrained into your neural pathways, will quickly find reasons why it still isn’t enough. With that belief screaming loud in your mind, behaviors will follow. You may experience deep fears around spending the money or losing it. You may want to ignore it or avoid investing it because just thinking about it makes you so uncomfortable. 

The same idea holds true if you already have enough money and then someone transfers more to you. Now, you have more than enough, which can be problematic in a new way. You may refuse to check your bank balances or avoid setting up meetings with financial planners or advisors. You may not even want to talk about it with close friends or family members. You may also adopt behaviors to “push” the wealth away, like spending, gambling, or giving. These are not true, value-led, mindful choice-based behavior. They are meant to serve as a way to get rid of your wealth in order to get rid of the feelings bubbling up. 

Now that we’ve defined wealth, let’s look closer at wealth transfer.

Wealth transfer is a giving; it’s moving money from one person to another. It’s also a receiving — something that suddenly comes into your life, either expected or unexpected. The transfer of wealth takes many forms, including a one-time inheritance, lifetime gifting plans, divorce  settlements, insurance pay-outs, income from a business or property sale, lottery or gambling wins, and more. 

As Ashley Agnew, the current President of the Financial Therapy Association explains, if someone doesn’t feel comfortable talking about how the wealth transfer makes them feel, they will not be able to maximize the value of their wealth. Further supporting this idea, it is estimated that 70 percent of wealthy families lose their wealth by the second generation, while 90 percent lose it by the third generation. 

To close, let’s revisit Sarina’s wealth transfer.

Sarina’s life had always been a tightrope walk, each paycheck barely covering her bills and necessities. She was accustomed to the constant stress of making ends meet, counting every penny with meticulous care. But today, everything changed in an instant. 

When she received the call about inheriting a million dollars, the weight of her financial struggles seemed to lift off her shoulders. The relief was overwhelming but also confusing, her exhilaration swirling with her anxiety about the future. Thoughts and questions bounced around in her mind: Do I put this money in my checking account or savings account? How do I invest it? Should I hire a financial planner? How do I even get the money? I don’t know what a wire transfer is. How do I tell my friends? Will they treat me differently? 

Unsure what to do next, Sarina stood in her living room, looking at the world with new eyes, feeling a mixture of disbelief, gratitude, and confusion for her sudden turn of fate.

 

Stay tuned for part two, where we dive deeper into the pain points associated with a wealth transfer. Click here for more supportive resources and additional help. If you’re ready for individualized support, book a free discovery call now!