Millennials Are Unprepared for the Great Wealth Transfer

Baby boomers are primed to leave millennials $84 trillion in assets over the next few decades, and many of the children are unprepared to receive that kind of money, a new Citizens Bank survey revealed. Altogether, 72 percent of the 1,500 Americans surveyed said they lacked the financial confidence to manage a large influx of money on their own. Read more: 7 Long-Term Investment Strategies This is despite roughly one in three Americans anticipating an inheritance within five years, especially concentrated among the millennial and Gen Z groups, where groups, 55 and 41 percent, respectively, said they expect to receive one.

"A staggering amount of personal wealth is projected to be passed on to heirs in the coming years, making it the largest transfer of assets in U.S. history," Brendan Coughlin, vice chair and head of consumer banking at Citizens, said in a statement. Financial advisers have been sounding the alarm on the massive transfer of wealth as most younger Americans don't have the proper financial education about what to do with that amount of money. Many might be apprehensive or inexperienced with formal financial counseling, as well. Read more: Compare the Best High-Yield Savings Accounts to Grow Your Savings "That certainly sounds great to the potential inheritors, but the concern is just how well millennials are set up to manage the wealth they're scheduled to inherit," Alex Beene, financial literacy instructor at the University of Tennessee at Martin, told Newsweek. "Undoubtedly, the heavy weight of debt on the millennial generation will also take its toll, as they're saddled with record amounts of student loans, housing costs and consumer credit." Millennials and Gen Z might feel less prepared for an inheritance due to their lack of trust for the financial advising industry, too. The report found that 54 percent of millennials said they have received poor advice after gaining a large sum of money, and 51 percent of Gen Z said they had the same experience. When it comes to Americans' plans for their future inheritances, many hope to use it for good. About 34 percent of Americans said they would start a new business, while 33 percent said they'd invest it into a family member's education. Beene said above all, though, the first step after any inheritance should be paying off debts. "Gaining a large sum of money can do wonders for your financial outlook, but if you're negating loans of any kind, you're losing money every day to interest adding up," Beene said. Based on previous studies, millennials have shown a stronger interest in spending money on experiences rather than physical possessions, but with their new inheritances, they might need to start rethinking that logic. "As they enter a new stage of their lives, it's important to start building wealth for your future and your family's," Beene said. "You can certainly still go on trips with the money you inherit, but don't forget about investing a good portion of it in funds to provide for you and your family later in life." Today, 62 percent of millennials don't have a will or a trust, according to the Trust & Will's 2024 annual study. And many baby boomer parents haven't been transparent about the amount of money coming their children's way or their end-of-life plans. For millennials, who are dealing with a housing affordability crisis and record-high student loan debt, having these conversations with parents sooner rather than later will be vital, the report outlined. "The squeeze they feel from nearly every aspect of their life has them putting off the simple planning that would codify their legacy and protect their family's future," Cody Barbo, the founder and CEO of Trust & Will, said in the report. "The sooner millennials and their parents normalize talking about end-of-life plans, the easier it will be when the time comes." Kevin Thompson, a finance expert and the founder/CEO of 9i Capital Group, said there will be significant tax consequences if millennials don't handle their new wealth effectively. "These generations need to be adept in financial management and...get with a trusted financial adviser to help them with their newfound wealth," Thompson told Newsweek. "These inheritances do not come to them for free. Some will have tax consequences while others will lead to outside consequences if not handled correctly."