CHAPTER SIX
Contemporary Values and Beliefs regarding Intergenerational Transfers
A gift consists not in what is done or given,
but in the intention of the giver or doer.
—Lucius Annaeus Seneca (4 BC–AD 65)
IT ISN’T JUST MONEY
In agrarian societies, the rules surrounding gifts and bequests defined kinship and status and determined the boundaries of family and community, as discussed in Chapter 2. Today we view property and money as material goods to be bought, sold, or given away. Yet, the exchange of material goods and money is not so simple. Money and wealth in all their forms are complex symbols, and their exchange is profoundly moral because exchanges define the relationship between the giver and the recipient. In a very real sense, our emotional ties are intimately linked to material exchanges. The parent-child bond is a fundamental one, and exchanges between these two generations define our very social structure. Inheritance and intergenerational obligations go far beyond the mere passing of material possessions. This is why it is so important to uncover how age-related factors govern these exchanges, as well as their implications for income flows, for meaningful personal legacy, and for meeting societal needs.
As Chapter 5 revealed, people’s attitudes regarding money are quite often established during childhood by family ideology and economic circumstances. Gifts are looked on as affirmations of affection and kinship for givers and recipients.
Inheritance is a form of gift giving that occurs at a particular point in the life course, and like all gift giving, the transfers of money and property involved often are quite suggestive of the relationship between the deceased and the recipient. Chapter 2 showed that, unlike in early America, today’s laws of inheritance are based on the privileged nature of kinship ties, especially those among nuclear family members. Rules and patterns of inheritance, therefore, like gift giving more generally, define the boundaries of the family. When an older person chooses to disinherit a child, the act is tantamount to evicting the child from the family. At a basic level, the disinherited person’s legitimacy has been revoked.
As part of the normal aging process, all of us gain personal knowledge of the problems inherent in the exchange of money while one is alive or upon one’s death. As discussed in Chapter 5, although the topic of inter vivos transfers and inheritance is commonly not considered in a child’s early years, later in life the issue may be so emotionally charged that it disables discussion among family members, if discussion had been allowed at all.
Chapter 5 showed that family cohesion is maintained through systems of ritualist gift exchange such as Christmas and birthday presents. Through his ethnographic observations, Mauss, a French anthropologist, examines native and tribal societies and looks at “potlatches” as a case example (Mauss, 1990). Potlatch is a cultural tradition of native communities in the Pacific Northwest. It is a widely studied ritual in which sponsors, helped by their entourages, gave away resources and manufactured wealth while generating prestige for themselves. In these tribal societies, balanced reciprocity involves giving to more distantly related partners with the expectation of equivalent, but not necessarily immediate, exchange. This type of exchange system is common in tribal societies and has serious ramifications for the relationship of trading partners. Against the established and clear expectations for giving and receiving among these tribal societies, how do everyday transfers in our own modern society compare? Is a gift among family members given without expectations? The narratives that follow illustrate just how often gifts are given and under what circumstances.
FAMILY VALUES AND IDEOLOGIES
In the absence of clearly established social norms for intergenerational exchanges, especially before death, what accounts for differences between parents and their adult children? Gift-giving behaviors are a result of ideas and examples passed from one generation to the next. Based on family history and values, each generation develops expectations of what gifts should be passed on or received. On the other hand, one’s own experiences with earning, saving, and spending, as well as one’s own personality also affect one’s attitudes about money. Differences in gift giving within the family also reflect the intensity and emotional content of family members’ interactions. They are often colored by the past and by life events, such as a divorce or marriage, that happened long ago or by problems that persist into the present.
Chapter 5 illustrated that gift giving within families is influenced by a complex set of interactions and emotional exchanges which together affect expectations as to what is likely to happen. In order for parents to give their children gifts of money or valuable goods, they must have adequate material resources. Yet even poor parents often give relatively substantial gifts to their children, and those gifts can represent far more than what may be immediately apparent. Working-class Latino families, for instance, while struggling to make ends meet, report feeling obligated to take financial care of their elderly parents whenever the parents are unable to do so themselves. It appears there are role ambiguities, or a different family ideology and values and contradictory societal expectations for immigrant families associated with everyday decisions about gift giving, and that traditional patterns of exchanges in later life, such as from older parent to adult child, may be less common. Indeed, the obligation to care for their parents may have been instilled in these adult children when they were young, as their parents cared for grandparents or great-grandparents. Supporting one’s elders, whether emotionally, financially, or both, is the ideology of many families, immigrant or not. For one son of a Hispanic immigrant family, financially helping his divorced parents is expected. He graduated college on scholarships and is doing better financially than his other siblings. They provide emotional and caregiving support to the parents, and he sends them money.
Further examples of role ambiguities occur among non-minority families as well. Health care is enabling people to live longer and more independently, but not completely so. Gifts of service and cash are often provided by children to their aging parents as a result. In addition, the precarious nature of the economy leaves many young families vulnerable. Sometimes new relationships are forged between parents and their children to meet individual needs. Sometimes these relationships are mutually beneficial; sometimes they simply benefit the recipient.
One unmarried woman in her midthirties is a good example. She moved from the South back East to live with her widowed father when her job became precarious. Her father wanted her to come home so she would be close to her family. The father is getting close to retirement age and his health is not very good. While he never actually said, “I need your help,” it was understood that her assistance would not be unwelcome. Now, the woman is able to telecommute to her job, make sure her father gets to the doctor and is well cared for, and she pays for upkeep on the house.
A similar situation, but with different family ideologies, is illustrated by a family living in the Hill Country of Texas. Due to bad investments, the patriarch of one old family found himself barely hanging on to a small estate. In his eighties, his health and financial situation were such that he could function on his own but could not maintain his property without assistance. He was unwilling to sell the land, because the price it would fetch in its current state was not what he considered its worth to be, yet he couldn’t afford the repairs to bring it up in value. Moreover, the land was the only asset he had left to leave his children. The gentleman’s youngest son decided that he could help. An arrangement was struck: the youngest son and his wife would move onto the place, build a separate, smaller house on the property, look after the father and pay for upkeep on the property. The father made it evident that, upon his death, the main house would be left to the son, while the extensive antique collection would be left to the daughter. When the son went over his father’s will, the wording was such that, to keep the house, the son would have to pay half the estate’s value to his chronically unemployed sister. The mutually beneficial situation had become an economic drain on the young couple as the money and time they had invested to maintain the property while the father was alive was not being considered equity. Upon the father’s death, it would cost more money to settle the estate with the sister than if he had left it as it was before the young couple moved there. Unfortunately, the father was continuing a family ideology of helping a child more in need rather than considering the equity being invested by the son. For the son, his sister seemed to be being rewarded for opting for unemployment rather than underemployment.
LEAVING A LEGACY
An inheritance is a fundamental tie between generations, and it solidifies, in a final act, a person’s place in the giver’s life and emotions. Inter vivos gifts serve much the same purpose, though without the finality of a will. With each act of giving, or not giving, a family’s values and ideologies are transferred from one generation to the next.
The research reported in Chapter 5 underlined the fact that respondents’ assessments of experiences when they were young pinpoint the minimal extent and frequency of exchange between parents and adult children, and that most financial transfers in fact occur at certain life-course transitions, such as entering college or buying a home. Support from parents tends not to be constant across adulthood; the early forties are marked by the most dramatic decline in receipt of parental support.
Several other determinants of gift giving have been studied. Parents do not usually make monetary gifts when the child has no pressing need, and widowed and divorced parents do not provide as much support to their children as married couples do. It has also been shown that adult children who receive cash assistance tend to be younger, unmarried, with children, and to have completed less schooling. Also, parents who give assistance tend to be better off in terms of income, wealth, and education. Unless an adult child has special needs, middle- and upper-income parents want to divide equally their inter vivos transfers. For instance, when a young college graduate decided to open up a franchise clothing store, and not pursue an advanced degree, he was able to get the startup capital from his family. This young man’s parents had paid for his siblings’ law and medical schooling. Because he did not pursue further education, his parents gave him the money set aside for his continuing education to help start his business. Once again, whatever the factors influencing gift giving between generations, such exchanges represent more than simple economic acts.
The narratives that follow illustrate the concepts of transferring family ideology and assets across a wide range of socioeconomic strata.
TRANSFERRING ASSETS
Parents may transfer assets to their children during life and/or after death. The first, an inter vivos transfer, occurs as gifts of cash or property while the giver is alive. The second occurs in the execution of the directives in a will or, when a will is lacking, by a court’s directive. Whether a parent decides to give away assets while still alive or as an inheritance is determined by several factors. Family values and moral obligations play an important role in decisions about gift giving in late life, as do economic factors, health care needs, and generation.
Although intergenerational support to children who are in midlife is not typical among American families, aging parents are likely to be involved in material exchanges with at least one adult child at some point. Estate planning is a concern primarily for the upper and middle classes, whenever estates are large enough to justify elaborate planning. Among the working class, passing on a modest estate may be less troublesome, and a simple will—or no will at all—may suffice. For the poor, passing anything on to later generations is rarely a possibility.
INTER VIVOS EXCHANGES
An overriding concept of inheritance is the centrality of the child’s future and the importance of education. Many of our study respondents felt that education was the key to getting what one wanted out of life. It was important to give permanent loans so children could leave school without debt and get a foothold in society. Not surprisingly, giving money to adult children brings happiness to the giver and the recipient.
Cassie, a married woman, stated: “The gift for college education not only is what you can do to help someone, but also it makes you feel good.” She remembered her own gratitude for scholarship money she had received. She made a further point: “It means more when you are able to look someone in the eye. … When I received $5,000 to $6,000 after my father died, I didn’t know what to do with it. I can’t remember what I spent it on. It seemed so unnatural. I would have appreciated it more if he had given me that money while he was alive.”
Liz, a divorced woman, received assistance from an additional member of the preceding generation. “My father saw to it that I graduated from college without debt. I have the same goal for my sons. My oldest son will get $1,000 to start … married life. He will also get a $1,000 rebate from his college for graduating earlier. The other two children can go wherever they want to, but I will have to work hard to do this. My uncle gives me a $10,000 annual gift for each of my three boys. He created an account for them in order to purchase braces, college, and other medical expenses. I feel that he is extremely generous, and that I am not alone.”
Expressing the pleasure parents can derive from financial transfers, one woman said: “When my son bought a condo, I offered $10,000 to him, but he didn’t want it. I gave my children each $10,000 when my husband died five years ago. I told them just to hold on to it in case they needed it. I am glad that I am in the position to be able to do this.”
For another mother, it was also important to help her children when they really needed it. “All of my children are adults and have children of their own. They have their own struggles and I have had to help them during various crises. They hated to ask for help because they have their pride. But I could always tell when things were not right and I would offer them some help.”
Some inter vivos gifts have strings attached. Usually the child is exhibiting a behavior that is not condoned by the parent. “My son is living with a woman who doesn’t pay her rent. He brings the situation up and wants to air it out with me. I laugh at him. He doesn’t want any more financial help. He prefers not to accept any more gifts because he believes strings are attached.” For this son, his mother’s derisive attitude makes taking financial assistance from her too expensive.
These sorts of family dynamics, where strings were attached to a loan or inter vivos transfer, were observed in children. Theoretically, if the children were all good, they should deserve it. But if they were bad, they would need to reconsider. In the case of supporting a child’s higher education, George stated: “In general, I believe it is important to loan children money, but you have to take into consideration how responsible your children are. You bring up passing grades, and we will pay for tuition and books. We paid for our daughter’s graduate school, and afterward for her rent and utilities.”
What happens when strings are not attached to inter vivos gifts? Parents want the best for their children because they desire that their children will do well in life. But unlike bequests, which are usually equally divided among heirs, inter vivos transfers occur as the result of a child’s need and a parent’s general concern to help a child with financial problems (Cox, 2003).
The attachment of strings is sometimes gendered. One Mexican American couple’s son is angry with the unconditional support his parents have provided his divorced sister, who does not work. His parents purchased a home for her in their name and routinely send her checks. She lost custody of her daughter even though the parents paid hundreds of thousands of dollars to contest the decision. This situation harkens back to the chronically unemployed daughter receiving preferential treatment from her father, even at her brother’s expense. What seems fair to the parents may not be to the children.
For most people, whatever fiscal transfer tradition is in their family is one that they will continue themselves. This is, of course, contingent on their belief that the tradition is “fair.” Liz’s example above, is a perfect example. She benefited from her father’s and is benefiting from her uncle’s financial practices toward her. She will, in turn, try to do the same for her sons. Cassie, on the other hand, felt that the financial gift from her deceased father would have been better appreciated had he given it to her while he was alive. She perhaps will change the tradition by giving inter vivos gifts, so that she and the recipient can both appreciate the gesture.
CHILDREN HELPING PARENTS
The occasions when money or other assistance flows from children to parents are often very specific: when health problems arise or retirement funds provide a meager existence or worse. Pride and ideologies that demand self-sufficiency often keep parents from asking for assistance from their children.
Parents from working-class and middle-class backgrounds feel strongly that they do not want to be a burden on their children. Spending within one’s means and avoiding going into debt in later life are still important to them. Once again, the lessons learned during the Great Depression resonate in today’s elderly people. As one woman put it, “My husband and I are living comfortably but we do not have a lot of amenities. We are living on Social Security and a small private budget. I tell my children that it is important to keep on a budget. We never have to ask our kids for help.” This attitude usually suffices until a financial crisis arises.
Gay couples may be in a better position to help parents because they are less likely than married couples to have children to support, too. David said, “My partner’s mother is in need of financial help. Both husband and wife rely heavily on Social Security.” In this case, David and his partner provide the financial support while his partner’s sister provides emotional and practical care to her parents.
Sometimes parents’ needs are not recognized or acknowledged by children. Lauren, who is now in her midthirties, was surprised to learn what her parents thought they deserved and needed when Lauren’s godmother bequeathed her a small inheritance. After learning of her good fortune, she was shocked to discover that her own parents felt that they deserved at least part of her inheritance. Perhaps they had experienced financial difficulties as a result of her father’s retirement, despite the fact that he had a private pension and Social Security. However, Lauren didn’t think her parents needed the money. She felt she needed the money more because she and her husband had two children to support. Of course, she would have had to pay an inheritance tax on any gift to her parents. Today, Lauren and her parents, who are in their late seventies, barely speak to one another and when they do, the topic of money is off-limits.
Leaving an inheritance is usually not an option for people facing economic stresses or hardship. It’s a sad situation for all parties when a spouse dies and the surviving spouse, usually the wife, is without income or assets. Tricia recalled: “My husband’s father left things in a mess when he died. He had invested in the stock market—high-risk funds—and lost thousands of dollars. He kept his wife uninformed about their financial situation, including lending money to a neighbor’s son without her approval. Even worse, he never organized his tax or financial records. For this reason, she had no way to track what had happened to their money.”
CHOOSING INHERITANCE
If inheritance is chosen over inter vivos gifts to transfer assets from one generation to the next, a whole set of issues are usually addressed. What do parents expect to leave their children and how do they intend to divide their estate? Issues of fairness color most decisions of inheritance. Deciding what is fair in blended families, how to distribute assets among children who have experienced various degrees of success or failure, or whether there is any money to leave at all greatly challenge family ideologies.
Not surprisingly, what the empirical evidence shows is that, in estate planning, most parents, regardless of ethnicity, think it is important to give each child an equal piece of the pie. They feel it is the right thing to do, and they are glad they are able to do this. An African American male lawyer stated: “Yes, I feel strongly about this. I would try to be equal. It is important to me, because I don’t want to show favoritism. I would not try to do anything to cause them to feel that I was showing favoritism. It makes sense that in the long run it would have caused a lot of problems. It would prevent any resentment.”
One couple stated: “We’ve talked about inheritance with our children, but not amounts. We will divide the estate into four. My biological children will get an eighth and that makes what we have divided up equally. My two step-children have money from their maternal grandmother. For personal items, we will make a personal list of items and they will draw numbers for them.” This businesslike approach to coping with a blended family makes the parents feel like they are being fair to all. Whether their children will feel the same is unpredictable.
What if you wanted to leave something that no one wanted? This is the situation one couple is facing. As one father of a blended family described it: “We talk to them in general about their inheritance. We have some things that are going to my children and others to her children. We recently downsized our home and we want to pass items on to them. But they don’t want them, they don’t have room for them, and they don’t want extra things.” This is also the situation for Joan, who wants to leave her vast collection of eclectic things to her children, but her husband tells her they don’t want it—that her stuff is dated. What is valuable to one generation may not be to the next.
Still, most respondents believe that the right way to handle their estate, however modest it may be, is to tell the children the reasons the parents wish to pass on their assets and what role they expect the children to play in maintaining the family’s values. Making sure that all siblings are informed helps to avoid trouble after the parent has died. “My children know that I have an advanced directive and a will. It makes me feel proud that I can teach them to plan rather than to wait for a crisis,” said one respondent.
There are risks associated with discussing one’s will. Diane admits, “My oldest son is still upset because I didn’t include his wife in my will. If he thinks he’s going to get two-thirds he should forget it. When you are married it’s both your money.” A divorced African American mother flatly stated that she did not think it was right for her children to expect certain things from her in the way of inter vivos transfers and inheritance. As she put it, “That is my son’s responsibility. He created [his debt] and the buck stops with the two of them.”
Many parents stated that they did not expect certain things from their children in return for an inter vivos transfer and inheritance. Michael noted, “I would say probably not. I was given those things and I trust them to do well. I watched my parents give generously. My grandparents gave generously, and that freed up their ability to give to others. My children will be older, when they turn 18 to access this set-aside money for graduate school, first house, at a time in their life when they can really use it. I have some hopes from a value point of view. But I received the inheritance with no strings attached.”
For those who inherit large amounts of money or property from parents, relatives, or nonkin, the bequest can profoundly alter both their financial situation and the nature and quality of those relationships. Smaller bequests can still have enough of an effect to generate jealousy and ill-will among heirs. These resentments can linger for years, and sometimes the distribution of an estate tears a family apart.
CHALLENGES TO FAMILY IDEOLOGIES
My research found that the main challenges for most respondents when deciding what to leave to whom were deciding when and how much to give children who were having financial problems, deciding what would be fair, the temptation to play favorites among children, and how to dispense inheritances in blended families.
In the case of a child who has not turned out as well as a parent had hoped or when a child has forsaken the family ideology, the will is the place where the parent gets the last word. As Lisa explains, “Even though she is younger, [my daughter] is the executrix of my estate, because my son is so irresponsible. My son has three children. His half of the estate is divided into fourths because that is the only way his children will be educated. Anything that he gets will be gone immediately.”
Lisa continues, “My daughter will be in charge of the money for the two younger children, and an aunt and uncle for the grandchild who is living with me. The children can have the money at 18 if they are in college but at 30 if they are not in school.” By carefully specifying who does what and who gets what, Lisa is using her money to ensure that her son’s children will at least have a chance for either a college education or a financial boost in life. She is passing judgment on her son’s behavior by cutting him out of the will, but she is showing love and concern for his children through her gifts and thoughtful arrangements.
A similar situation exists for a grandmother from the Silent Generation who does not approve of her younger daughter’s husband. She plans on leaving that daughter’s half of the estate in a trust for her children. Her older daughter, however, will get her share of the money outright. “My husband worked hard for his money and I don’t think he would want me to give it to my son-in-law so he can buy frivolous things. If I put it into a trust, at least the money might be there when they are ready to go to college. My older daughter can take care of the money and use it for practical things. I don’t have a problem giving it to her at all.” This Silent Generation grandmother frowns on her Baby Boomer son-in-law for his spend-thrift ways. In her opinion, it is better to make sure that the grandchildren are provided for rather than the son-in-law. She knows she risks a family squabble over this, but she is resolute in her opinion and her decision.
Sometimes judgment is not a part of special provision for grandchildren. Many elders who can afford to do so carefully apportion their estate so that their grandchildren as well as children are included. One couple is receiving land as an inheritance from the husband’s parents and his children are being provided for in a trust. “We’ve talked to our children about the land inheritance. My parents have set up a trust for our children but they won’t discuss the amount with the children.”
Sometimes parents leave children assets specifically because they know they will be needed. They have decided that in order to be fair, they must consider each child’s situation. “I have spoken to my children and told them what I am leaving to them, and why,” declared one respondent. My homestead, I am leaving to my daughter because she is a single mother and has overcome her problems managing money and can pay the taxes.” Here, a daughter’s behavior that obviously had caused problems in the past—her inability to manage money—had been corrected satisfactorily and she was once again in good graces with her mother. In another example, an African American divorced woman believed that her gifts should not be distributed equally, that instead a particular child’s needs should be considered. The distribution should depend on where the children are in life and what their needs are. She explained that her daughter needs a house as opposed to her son who just bought a house. Consequently, her daughter will get her house upon her death.
Hard feelings between siblings can arise when parents fail to discuss the property distribution, especially if it is not an even distribution. For example, Suzanna, a Latina in her midthirties, believes that while her mother had good intentions about her estate, her situation prevented a smooth probate. Her mother, a widow for many years, felt it was important to pay off her debt so she could pass on her wealth to her children. Her home was worth about $250,000 and comprised the bulk of her estate. But her plans fell apart when she became seriously ill and required intensive health care. Suzanna, the youngest of three daughters, was the primary caregiver, and she did not receive support from her two older sisters. After her mother died, the oldest sister, who was the executrix of her mother’s estate, sought to exclude Suzanna from receiving any belongings from their mother’s house. Tragically, a costly legal battle between the two has ensued over the distribution of the estate. Suzanna’s mother failed to instruct her oldest daughter on how to distribute her belongings upon her death. As the only caregiver during her mother’s illness, the special bond Suzanna felt with her mother has been denied by her sister. By excluding her from the estate, the sister is damaging Suzanna’s place in the family and in her mother’s legacy. Did Suzanna’s mother play favorites by selecting the oldest sister to be executrix or is Suzanna’s sister playing favorites with her other sister and consequently denying Suzanna part of her mother’s legacy? Whatever the reasons, relations have soured among the sisters.
When family values or ideologies are not followed, judgment is often made or cemented in the contents of a will. One elderly family matriarch was severely upset and disappointed that her youngest son had married someone she considered beneath their social class. In her generation, social classes were well defined and behavior between them rigidly controlled. She stopped speaking to her son for his social transgression, believing that he had brought shame to the family. After many years of discussion with her family, who begged her to forgive this son, she finally began speaking to him again. However, after she died and her will was read, it became obvious that she had really only superficially forgiven him, for she had completely cut him out of the will. The judgment expressed by the will was final. She would not allow family money to be passed to someone who betrayed her family values. Even more tragic is the situation in which relations between quarreling family members have improved but a will written during the period of estrangement is not updated, and execution of the will digs up the bad feelings and perpetuates them.
Blended families often pose a special problem, especially when there are children from each side. Sometimes the blending works, but sometimes it doesn’t. “My oldest daughter did not think she was part of the family so she is not included in the will,” says one elderly gentleman. Similarly, the adopted children of one couple were never accepted into the woman’s family. Gail’s children were never able to prove themselves worthy of inclusion in her extended family, even when they cared for Gail after she developed a fatal neurological disease and her own sisters rarely visited. Then, Gail’s family was outraged when she left her extensive estate to her adopted children. Her family believed that non-blood relatives should not inherit anything.
TO GIVE OR NOT TO GIVE, THAT IS THE QUESTION
These data suggest that it may be wiser to focus on what one’s own needs will be than to try to read a crystal ball to understand children’s expectations of a potential bequest. Decisions about how to structure asset transfers for an adult child with special needs can therefore be particularly vexing. To be sure, the most important thing to realize is that the parental role is carried into old age. Whether father or mother, birth parent, step-parent, or adoptive parent, part of life has been spent caring for the child, and this care in some ways continues throughout the life course, even into the parent’s seventies, eighties, and nineties. People tend to bring this sense of responsibility to their estate planning and their lifetime planning.
However, some legal professionals from the National Academy of Elder Law Attorneys strongly believe that this may be the wrong focus (Farrell, 2001). A good example is the question that comes up in every estate planning interview about who will be an individual’s attorney-in-fact under a power of attorney and who will be the executor of the will (Schaefer, 2000). An attorney-in-fact under a power of attorney is the person one names to act on one’s behalf when a power of attorney is executed. That person takes action in one’s stead and presumably for one’s benefit. Many people feel that they have to name all of their children as agents to act for them under the power of attorney, rather than the one who is most capable in the area with which they are being entrusted. And parents do this even though they suspect it is inappropriate and ineffective (Schaefer, 2000) because they don’t want to offend any of their children or exacerbate any sibling rivalries (Cox, 2003). The tendency to treat children equally originates from a parent’s caring impulse toward them when they were five- and six-year-olds.
But this nondiscriminating assignment of responsibility may not be prudent. By the time people need a power of attorney or an executor, their children are typically in their fifties and sixties, and by that time the strengths and weaknesses of each are known. One may be good at making health care decisions. One may be good at making financial decisions. Those are two different strengths. Naming the one who is good at making health care decisions to be the person who makes financial decisions might be a recipe for disaster. As the work gets done by those children, they can come into conflict because the parent has not wisely applied their strengths.
Another precaution that should be taken is planning for the possibility that the elder may become mentally incapacitated. Elder lawyers frequently receive phone calls such as this: “My mother is now stroke-ridden. She’s in the hospital and I need to get a power of attorney.” A lawyer may not legally take instruction from an incapacitated person and prepare a document for that incapacitated person to sign. After a person becomes mentally incapable of decision making it is too late for that person to appoint a power of attorney or executor.
Special issues associated with children with severely disabling illness affect estate planning. Depending on the nature of the disability, developing a plan to support such a child may change what a parent wishes to leave to his or her children as they grow older and who is designated as the responsible party. Chapter 7 discusses a couple of strategies that some families are enacting to cope with this and similar situations.
It is clear from the nonquantitative research that families vary widely in their gift-giving behavior, depending on their social class, ethnicity, religion, and factors related to the timing of life-course transitions, such as divorce. Some parents plainly see money as one promising means of cementing the bonds with their children. Others, however, separate the meaning of money from emotional ties and do not give gifts to their adult children. Today, most middle-class parents provide for all or most of their children’s college education, and many feel that such a gift is sufficient. Some help with the purchase of a home but view such money as a loan, perhaps even repayable at favorable interest rates.
In summary, many people express a deep desire to pass on as much wealth as they can to their children without sacrificing their own economic security in old age. These attitudes and opinions regarding financial exchanges in adulthood inform empirical research which suggests that parents allocate transfers to children on the basis of several criteria (Bernheim and Severinov, 2000). On balance, parents who have money give equally to their children upon their death. An expectation of services in return for their financial gifts was not revealed by these respondents. On the other hand, elderly parents do indicate personal concern about a child in dire need of assistance, and this often leads to greater financial support for the poorer among a couple’s children. Certainly, inter vivos transfers are often dictated by a child’s economic needs and are not distributed equally across the offspring. As discussed in Chapter 4, economists have documented this tendency toward inter vivos transfers and permanent loans to those children who are “liquidity constrained” (Cox, 2003).
Regarding inter vivos transfers, the size and nature of the gifts vary by socioeconomic status. The rich can better afford to transfer wealth to their children during their own lifetimes. Whether or not such transfers occur also depends on each family’s ideology concerning money, gifts, and reciprocity. In Chapter 7, I discuss the influences of public policies and the law on gift giving, spending, and savings.
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