New York -- A word of caution to baby boomers whose basic retirement plan is to inherit: Although the boomer generation, as a whole, will inherit an unprecedented amount of money, no single son or daughter can count on getting everything owned by mom and dad.
People 65 and older are holding $5.2 trillion in wealth, says Robert Avery, professor of consumer economics at Cornell University. That number would be even higher if retirement plans were fully counted. Thirty years ago, perhaps 15 percent of Americans were able to leave estates worth $50,000 or more in today's dollars. Now, it's 25 percent to 30 percent, Avery says. A much larger number will be bequeathing modest sums.
But there's many a slip twixt lip and cup. Your widowed dad might marry a younger woman and leave her the property. (And why not? It's his money.) Or he might live to age 99 in a nursing home, paring down your inheritance by $35,000 a year. (You hate to count, but everyone does.) Your ailing mom may favor a devoted nurse's aide, or grow financially close to her minister.
Economic and social trends are also working against inheritance. Your father might be nudged into early retirement, which will force him to use up his money faster. Your mother might take out a reverse mortgage, which pays her a monthly income out of the equity in her home. Or they both might make lousy investments that cost them (and you) a big piece of their savings. You can't even count on real estate values going up a lot.
Fortunately, however, inheritance at death is only half the story. To an unprecedented degree, members of the boomer generation are coming into money while their parents are still alive. If they can afford it, parents help their adult children buy their first house and seed their grandchildren's college accounts. They may also write checks for children who lose a job or start a business.
More than anything else, family capital divides the haves from the have nots. In 1983, up to 85 percent of the wealth of boomers under 40 could be traced to gifts and the capital gains that the gifts engendered, says economist Edward Wolff of New York University.
Scrimping and saving helps a family get ahead, but nothing beats the profits earned from money invested in homes, stocks and businesses. According to a 1988 Census Bureau study, the black middle class had a net worth only one-third that of whites -- in part, I'd guess, because so many of their parents lacked enough capital to give them a boost.
If you stand a good chance of inheriting (or bequeathing) money, here are some ways you might try to ensure it.
* Buy nursing-home insurance by age 65, while it's still affordable. This saves seniors from footing the full bill themselves. A 65-year-old might pay $575 to $1,385 a year for an $80-a-day policy with an inflation rider. Some parents sign over -- their wealth to their kids to make themselves "poor" enough for Medicaid to pay. This works if they make the transfer early enough. But if they never enter a home, they'll be relying on their kids for support.
* Gifts from parents to an adult child should be made in the child's name, not in the names of child and spouse. The child should keep the money in his or her own account. That way, if there's a divorce, the law in most states will let the child keep the full gift.
* It's best for gifts to come from bank accounts rather than from selling appreciated stock. If parents sell the stock, they will owe taxes on the profits, whereas if the child inherits that stock, the accumulated taxes never have to be paid.
* An older parent who remarries needs a prenuptial agreement if he or she wants to preserve all the money for the kids. Without it, a spouse cannot be left any less than one-third to one-half of the estate. If a couple read this paragraph and say "oops," they should get a lawyer and ask him or her to draw up a post-nuptial agreement.
* There's no federal death tax on estates as high as $1.2 million if your parents use a special type of trust. If they're richer than that, they might buy life insurance, intending the proceeds to cover the tax. To make this work, the policy itself should be owned by an irrevocable trust. On the other hand (a parent might say), the heck with insurance. Even after tax, the kids are going to inherit enough.