Why fewer seniors are leaving inheritances

The e-mail from Daisy Granger's parents came as an unpleasant - even jarring - surprise to her and her three brothers. "We just want you all to know," their 66-year-old father wrote, "that you should not expect an inheritance after we pass. We might leave something, but it's more likely we will spend it to maintain our lives as we wish for the next 20 or 25 years...."

Ms. Granger's father may have been more direct than most parents about it, but in one way or another thousands of would-be heirs are getting a similar message: Don't plan on getting an inheritance. With expected life spans stretching longer and longer and the cost of healthcare skyrocketing, the idea of parents leaving largesse behind is becoming secondary to their using it to live as comfortably as possible.

At the same time, many older Americans today have a different ethos about passing on money than their ancestors had. Some believe it's better for their children to make it on their own, and others want to use whatever little funds they have left to enjoy their twilight years.

The result is a potentially dramatic drop-off in the transference of wealth in many families that may affect successive generations' planning about everything from paying off longstanding debts to how long they will stay in the workforce.

"Baby boomers are going to get hit with a series of bad economic shocks and bad reality checks, one of which is relatively low inheritances," says Laurence Kotlikoff, an economist at Boston University who is expert on bequest trends.

In many cases, parents give money to their children before they pass on. Such gifts can take subtle forms, such as financing a grandchild's private-schooling.

But new statistics from a forthcoming report by the American Association of Retired Persons (AARP) indicate that 14.9 percent of baby boomers in a 2001 survey expected an inheritance from their parents, down from 26.9 percent in 1989. Among "post-boomers" (those born after 1964) the figures are even more startling; only 5.8 percent expect a bequest, down from 10.8 percent.

Add in the recent stock market plummet, which may not be reflected in those figures, and experts suspect this major change in the transfer of generational wealth is only becoming more dramatic.

Estimates have varied widely over the past decade as to how much wealth the pre-Boomers would leave to their offspring, with some economists - at the height of the market bubble - predicting a staggering $136 trillion would be passed down in the next 50 years. A more moderate, though still substantial, $41 trillion is seen as a better guess now, especially due to care expenses, according to American Demographics magazine.

"People are planning to make their money go further because they might need it," says John Gist, AARP's public policy director. "Also, people put their money in the market and now that the market has fallen, they're less optimistic about being able to either give or receive an inheritance."

One of the most common reasons is the one that snuck up on Mary Durlak, of West Falls, N.Y. Her parents lived frugally to save about $300,000, but her 87-year-old mother broke a hip and has been in a nursing home for the past three years. At $7,000 a month, the home has swallowed the money Ms. Durlak's parents had hoped to leave her and her sister. Durlak, who is single and childless, admits she figured the inheritance was part of her retirement plan.

"Now I say to myself, 'What was I thinking?' " says Durlak, who works in the marketing department at Buffalo State University. "It just seemed incredible to me that my mom would be one of the people who would not only end up in a nursing home, but in a nursing home for a real long time."

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