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Merrill Lynch Sets Out The Terrain For Families Handling Wealth Transfer

Tom Burroughes, Group Editor, August 8, 2017


Aging and wealth transfer decisions are major issues for the wealth management sector, as this paper from Merrill Lynch Private Banking and Investment Group explains.

The upcoming transfer of wealth by retiring Baby Boomers to the next generation – an estimated shift of $30 trillion (source: Accenture, CNBC, others) – is understandably generating considerable noise and some action in North America’s private client sector. And right on cue, Merrill Lynch has rolled out a paper setting out steps families should consider, wrestling with sensitive issues such as cognitive decline and medical care.

Merrill Lynch Private Banking and Investment Group has produced a 24-page paper, Aging and Your Wealth, setting out a series of eight issues: “Starting the Conversation”; “Creating A Plan”; “Assessing Your Assets”; “Passing On Your Legacy”; “The Challenges of Caretaking”; “Crisis Management and Sudden Death”, and “Preparing For Tomorrow Means Enhancing Life Today”.  

The firm says that with rising life expectancy and increasing costs of long-term care, planning needs to be considered now, rather than put off. The paper delves into estate planning structures such as different forms of trust; the role of different types of fiduciary; how to assess physical and other types of asset, as well as general planning and communicating such plans among family members. 

The report’s reference to issues such as cognitive decline is another sign that such challenges are rising up the wealth management priority list, as seen by this publication recently. The aging of populations in developed countries, while clearly a broad trend, is one from which even the wealthiest families cannot escape. There have been concerns, for example, about how aging citizens can be taken advantage of by unscrupulous family members and outside parties.

“The reality is by 2030, when the last of the baby boomers has turned 65, one in every five Americans - or about 72 million people - will be an older adult,” the report said. “And though the current average life expectancy in the United States is 79 years, those who live to age 65 have a much greater chance of living another 20 years.”

“One of the negatives of longevity is people delay the planning process because they assume they’re going to live a long time,” Scott Cooper, wealth strategist in the Wealth Advisory Group at Merrill Lynch, said. “Yet the longer they wait, the greater the chance cognitive decline or an unexpected illness could compromise their ability to manage their own affairs or effectively direct another person to manage their affairs,” he said. 

Among the statistics mentioned in the paper is that while few people anticipate needing long-term care, the reality is 70 per cent of those turning 65 in 2015 will need some form of long-term care during their lifetime. Only four in 10 wealthy individuals consider themselves prepared for the financial impact of long-term care, according to a US Trust survey. (US Trust is a sister organization to Merrill Lynch, within the Bank of America group.) Each year, approximately 424,000 people experience sudden cardiac arrest, with only about a 10 per cent survival rate.

(On the issue of ensuring cognitive decline is recognized as a high priority focus for wealth managers, this publication is interested to hear views and analyses from readers; they are invited to email the editor at tom.burroughes@wealthbriefing.com)



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