As boomer parents' inheritances dwindle, family disputes grow

As an estate planning attorney, Les Kotzer said he was taught to focus on helping clients save money. That view changed, he said, after a visit one day from a baby boomer couple.

The husband and wife, both in their 50s, were smartly dressed, but later revealed their luxury car was leased and their home "mortgaged to the hilt." When Kotzer asked what the husband did for a living, they explained he was a "waiter."

"The wife said, 'He's waiting for the inheritance,'" said Kotzer, of Thornhill, Ontario. "A lot of boomers are depending on what their parents have saved all these years to pay off their debts and loans.

"Within that dynamic, you see problems," he said.

Kotzer, co-author of "The Family Fight: Planning to Avoid It," said the couple are typical of many boomers who expect to inherit money from their parents. They might be disappointed, he said, because the family assets have dwindled, or their parents haven't given them any information about their finances or about their wills.

And many times, boomers find they're fighting with siblings and other family members over who gets how much.

A whole industry of financial planning and attorney services has cropped up aimed specifically at avoiding such problems after a parent's death, ranging from extensive will planning to counseling on how seniors can best communicate inheritance decisions to their children.

Different attitudes

The problems can start, some planners say, because boomers have a different attitude toward money than their parents.

"Where the older people were savers, because they were Depression-era children and adults, baby boomers had more. We tend to be more the credit card generation," said Debra Kroll, director of Temple Law School's Elderly Law Project in Philadelphia. "So baby boomers often depend on their parents' assets."

And many seniors actually have fewer assets to pass on. The bear market has ravaged many stock portfolios, while their other savings have been depleted by the high costs of nursing homes, long-term care and prescription drugs.

Problems also arise because of changes in the family structure. The increase in divorce and remarriage over the past two decades has created confusion as to the rights of stepchildren and second spouses in wills, experts say.

"This is a very financially lucrative area for attorneys. It didn't used to be," Kroll said. "Children are encouraging parents to do estate planning to wind up with the money. ... This field is expanding based on that."

The result: lawyers and financial planners are starting to focus less on documenting exactly what a senior wants to say in a will, and are spending more time asking detailed questions about their boomer children, such as financial status, living situation and relationship with siblings.

Taxes vs. fights

Kotzer says he now counsels clients specifically with the goal of avoiding family disputes, even if the method of distributing assets results in higher tax costs.

For example, he notes that many parents wish to reward children who care for them in old age. He suggests parents give gifts to the child while still alive, even it means paying a hefty gift tax, and then allot equal shares in the will to avoid sibling disputes after death.

"Some of the times when people do planning to save taxes, they don't realize they could be hurting their family," Kotzer said. "My practice is geared toward saving the family."

Some financial planners also act as family counselors, encouraging parents to include children early on in estate planning meetings, so they understand exactly who is getting what and why.

Or, if that proves too uncomfortable for a senior, financial advisers suggest filming a videotape that can shown after a will is read to help explain the parents' decisions.

"I think the advisers can work with the family as a whole and that takes a different skill -- a counseling background or talent in bringing together people," said Sharon Burns, executive director of the Association for Financial Counseling and Planning Education, based in Upper Arlington, Ohio.

"Financial advisers need to thoroughly delve into the family issues, such as what are the relationships and whether there are children who have special needs," she said.