You might think that having a certain amount of money means you can get good advice. But a Bank of America Private Bank poll of 1,000 adults with more than $3 million in investable assets showed that only 48% of them had a will, a healthcare proxy, and a power of attorney. These are the three most basic papers that you need to make plans for your future.
The head of trust, estates, and tax at the bank, Jen Galvagna, said, “That shocked me.” She was also one of the people who worked on the yearly survey of wealthy Americans. She was even more surprised to learn that only 27% of the wealthy people who said they had an estate plan knew what it said.
There is no significance to the number of zeros in the estate’s value for the purposes of the law. Your family will have to go to probate court to take care of your business if you don’t do even the most basic estate planning. It doesn’t matter who you are. Power of attorney and healthcare proxy make decisions about your money and health care while you’re still living. Wills and trusts, on the other hand, decide what happens after you die.
Almost half of Americans have a will, which is higher than the national average of about 30%. However, this is still a very low rate when you consider how hard it could be to handle a large estate with many complicated assets to divide. Getting cash out of a bank account is pretty simple, especially if the account’s previous owner named the right people as beneficiaries. An unappraised work of art or a fancy pair of sneakers, on the other hand, could be a real pain.
Many times these days, you can find useful things in the closets of very rich people. 72% of people aged 21 to 43 who took part in the Bank of America study didn’t think stocks or bonds were still good enough to get above-average results. About 94% of Gen Z and millennials said they were interested in other types of investments instead. Real estate, crypto, and other digital assets were the most popular choices.
People under 44 were twice as likely as people over 44 to invest in real estate. In 2011, economist Joe Roseman called these real estate investments “SWAG assets,” which stands for silver, wine, art, and gold. Things like sneakers, handbags, watches, and sports cards are also in that group of assets. The goal with SWAG is to buy them and keep them so that their worth goes up.
“It was definitely a philosophy that lasted for decades,” Roseman said. With an eye toward a very long-term investment plan, he first suggested that about 20% of a portfolio should be made up of SWAG assets, and he still does. “Long-term economic trends shape my thoughts,” he said.
Concerns for many generations
An individual investor’s longest time horizon is clearly their own lifetime, but many also think about strategies that will last for more than one generation. They think that their children and grandkids will enjoy their wine or art for a very long time.
From Galvagna’s experience working in the trust area of a big bank, that doesn’t happen very often. Her poll showed that most young people don’t want to receive collections from older people, even though they are collecting their own things. A clear majority of all groups think that these things will cause a lot of stress in the family in the future.
“The most sought-after asset is never what the client thinks it will be.” People may think that everyone will fight over your amazing wine collection, but no one really wants it. “Younger people have a different view of things,” Galvagna said.
Many fans bury their heads in the sand and don’t make any plans when they see this, but it makes some of them take a good look at what they are doing. When Tom Ruggie, a certified financial advisor and huge sports memorabilia fan, recently went to update his will, he saw that he had a problem. His family didn’t want to or understand how to take care of his collection after he died.
To solve the problem, Ruggie made a chart of all of his assets that carefully listed where they came from, how much they were worth, and where they could be sold in the future. He used this as a starting point and made a 10-point scorecard for collectors and other people he knew in the collecting world to use to keep track of the life cycle of items they owned. It includes things like making sure the family knows about the things, keeping them safe, getting insurance, and planning your estate.
Some people might be let down when they find out that no one in their family wants their stuff, but Ruggie’s desire to gather sports memorabilia didn’t change. He said, “I’ve always known that my kids aren’t interested, but I’ve been really into it since I was 7 or 8 years old.” He said, “I’d rather my kids not keep the collection if they’re not interested in it. Let them enjoy the money they make from it and let someone else who is passionate hold those assets.”
Selling a collection isn’t the only choice. You could also give highly valued physical items to charity, especially if they have historical or artistic worth. Giving money to charity also needs some planning, as you can’t do that without estate planning.
Galvagna once helped a client who had a lot of old furniture. Everyone in the family didn’t want it. “Nobody was able to fit something that big and formal,” she said. “That kind of stuff can be given to museums or charities.”
This is the pitch that everyone with a collection needs to hear: “Your wine needs an estate plan because it’s not going to drink itself.”
