Intergenerational Planning and the Racial Wealth Gap

3 Basic understandings to Begin Intergenerational Wealth Planning in Black Families

As collective public awareness of the disparities in wealth between White and Black households grows, along with the various causes from a historical and contemporary perspective, the scope and magnitude of the issue can take on a mythological and possibly even insurmountable scale. Black families have a median and mean wealth of less than 15% of White families. Just 17% of Black families own their homes, compared to 46% of White families. These are just two of the staggering and long-persisting numbers shared in the most recent Federal Reserve survey of consumer finances.

As a Financial Advisor, working directly with families and business owners from many backgrounds, but most predominately from the Black community, I always want to stress the importance of understanding that the magnitude of the racial wealth gap is not something that can be remedied by the work that I do with my clients. Adequately addressing these massive disparities requires a multidisciplinary approach across private, political, and non-profit sectors, and even with much deserved recent attention, the code hasn’t been cracked. That being said, I do believe that the work we do goes a long way in lifting the floor for individuals, families, and institutions in our community. One area of financial planning in particular — Intergenerational Planning — plays a significant role in addressing several of the disparate silos in the racial wealth gap. White families are three times as likely to receive an inheritance, three times as likely to expect an inheritance, and on average expect to receive about twice the size of inheritance of Black families.

Intergenerational planning is about placing intention behind how the financial health and decisions of one generation are going to impact the financial wellbeing and opportunities available to the next. At its base level, creating more intentionality and best practices among Black families in the areas of insurance planning and estate planning can have a monumental impact on inheritance and wealth passed from one generation to the next. Intergenerational planning addresses many of the difficult questions around what happens to all families as one generation ages and eventually passes on, while the following generation aids in the process of planning and eventually settling the affairs in death. It’s a proactive approach to addressing the inevitable and having the courage to have uncomfortable conversations before life forces a set of limited options and decisions on our families. I want to share the basic tenets, mindsets, and first steps of where I believe any family can start with sound intergenerational and legacy planning.

1. Your wellbeing as you age will impact your children and loved ones: This is about understanding how your life cycle impacts that of the next generation. With good fortune, we will all have the opportunity to grow old and experience a happy, healthy, and secure retirement life. As you enter this stage of life, your children are either just launching their own financial and familial lives, or in the peak growth and earning stages of their careers. For most people in this stage of life, the risks and concerns are fairly similar.

-We don’t want to run out of money

-What happens if healthcare costs rise, or I experience a long-term care health event? Would I be a burden?

-Can I leave anything behind for my family?

2. Life Insurance Planning is an ongoing process: Unfortunately, it is far too common for people to treat their insurance planning as a “set it and forget it” type of transaction. There are varying philosophies, approaches, and strategies to life insurance planning, but ultimately what’s important is that you and your family understand what coverage is actually in place when someone passes away. This requires regular reviews — at least annually — of the type of coverage you have, if and when it lapses, and who your beneficiaries are.

3. Estate Planning is not just for the old and/or wealthy: Estate planning is not a fun subject for most to delve into, but it is absolutely critical to intergenerational planning. Estate planning gives you the power, while you are of sound mind and good health, to dictate what happens to your assets and on your behalf when you are not. Ask and answer these questions now to avoid more confusion, disappointment, and heartache later. Much like insurance planning, this is a process that should be revisited periodically in order to make sure your plan still matches your needs and intentions.

These basic tenets are far from exhaustive, but I believe an excellent place to start and ensure that you and your family are doing your part to raise the floor on generational wealth in the Black community.