When is Legacy Gifting Most Impactful? An Argument in Favor of Sooner (Rather than Later)

The most important conversation I have with a client often occurs before they formally engage us as their financial advisor. I ask them to define their financial goals in detail, which ultimately serves as the roadmap for the planning and investment strategies we will employ. Their goals almost always fall into three categories: lifestyle, philanthropy, and legacy. Lifestyle goals are usually the easiest to articulate. Who hasn’t daydreamed about how we would splurge if we suddenly had more money? Philanthropic goals are often similarly straightforward, particularly among families who have developed long-standing commitments to charitable causes. It’s the third category, how much wealth parents intend to share with their heirs, and when, that is usually the most complex.

When the client is a successful entrepreneur who has created wealth through their own hard work, they tend to set minimal legacy goals. They remember how the struggle to build their business fortified their character, and they want their children to develop the same values of hard work and perseverance. There is an understandable sense of pride for having made it on their own. When the client is an inheritor, the wealth has sometimes been corrosive in some way. Broken relationships, bitter feuds, and entitled mindsets are often byproducts of poor preparation for stewarding legacy wealth. In that scenario, the client is understandably reluctant to pass along the baggage, hoping that a clean slate will forge stronger children.

There are plenty of valid reasons why a client might be reluctant to transfer wealth to their children. But properly educating children about what it means to be stewards of wealth can be beneficial and inspire them to greater success, gratitude, and beneficence. Simon Quick’s founder Les Quick noted in a previous blog that temporary financial support for young adult children who have developed a strong work ethic and who are responsible with money is unlikely to knock them off their professional trajectory. His argument was focused on supplementing their budget to cover reasonable living expenses as they build their careers. Here I will argue in favor of opportunistic support of responsible young adults as they achieve important milestones. Examples include paying off student loan debt when they graduate from college; matching their contributions to a Roth IRA until their earned income disqualifies them from it; and helping them make a down payment on their first home. Today this type of support can make a critical difference as young adults build successful lives.

Younger generations face higher fixed costs earlier in life and they have less ability to save for down payments or investments. Consider the following:

• Even after adjusting for inflation, public college tuition has more than doubled since the mid-1980s, rising roughly 125% to 130% in real terms. It is much more likely that today’s college graduates will incur significant loan debt, leaving them with fewer financial resources for other purposes.¹
• In the mid-1980s, the median home cost about three times household income. Today, it’s closer to five or six times, fundamentally changing the path to homeownership and wealth creation. As a result, homeownership today is increasingly out of reach for households without a six-figure income.²
• Young adults today are roughly 50% to 70% more likely to live with their parents than their counterparts in the mid-1980s, suggesting that financial independence may be taking longer to achieve.³
• In the mid-1980s real wage growth for young workers was more stable and linear. There was clear progression from entry-level to mid-level roles within firms. Today’s labor market is more structurally fragile. Advancement depends more on external moves, which are riskier and less predictable. We see pervasive gig work, contract roles, and people working below their skill level.⁴

It becomes clear how all these factors tie together. The ladder still exists, but the first few rungs are farther apart, less stable, and harder to reach. So many young adults today are struggling to get ahead because the economic starting line has gradually moved backward.

Successful Boomers and Gen Xers can ensure their young adult children have the same opportunity for wealth accumulation they had as twenty-somethings by thinking about transferring legacy wealth opportunistically—and during their lifetimes, rather than through their estates. We want our children to be independent and not to remain “on the dole” once they have launched. Unexpected gestures of generosity that allow them to have reasonable work/life balance, start investing, or buy a home are more likely to increase happiness and bring grateful family members closer.

This realization is helping me refine my approach to the legacy goal conversation with new clients. I try to shed light on a reality that many parents have sensed but have not yet reckoned with. Gifts they might make to their twenty-something children making their way in the world have far more impact than gifts through their estate decades later.

Footnotes

1. College Board, Trends in College Pricing and Student Aid 2023; U.S. Department of Education, National Center for Education Statistics. Inflation-adjusted tuition for public four-year institutions has increased by approximately 125%–130% since the mid-1980s.
2. U.S. Census Bureau; Federal Reserve Bank of St. Louis (FRED). Median home price-to-income ratio was approximately 3.0–3.5× in the mid-1980s versus roughly 5.0–6.0× in recent years.
3. Pew Research Center, The share of young adults living with their parents, 2020; U.S. Census Bureau historical data. Approximately 31% of adults ages 18–29 lived with parents in 1980 versus ~50% at peak in 2020, representing a 50%–70% relative increase.
4. U.S. Bureau of Labor Statistics; Federal Reserve Bank of New York, Labor Market for Recent College Graduates; McKinsey Global Institute. Research documents slower early-career wage growth, increased job switching for advancement, and rising prevalence of nontraditional work arrangements among younger workers relative to prior generations.

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