The Gift That (Could) Keep On Giving: Wealth Transfers

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For credit unions, will it be a case of the gift that keeps on giving, or the gift that goes forgotten?

The pending transfer of wealth from aging Americans to family members has been well-documented. What's less well understood is what credit unions can do to capture not just those funds, but the relationships. A new Filene Research Institute study entitled, "Gifts that Connect Generations: A Role for Credit Unions," is seeking to provide some answers.

Authored by Jinkook Lee and William Kelly, the report suggests that many members over the age of 50 would welcome special accounts for specific gift purposes. For example, investment funds might be used to guarantee a down payment on a house for a child or grandchild. "By offering innovative products to help achieve that goal, credit unions could become the primary source of assistance when families consider these important issues," the authors said.

According to Filene, it is significant for credit union fields of membership that inter vivo giving (wealth transfers while the giver is alive) is not limited to extremely affluent households. Although the amount given rises with income, the increase is relatively modest, the Filene study observes, adding that givers with smaller incomes also make significant inter vivo gifts.

"In short, credit unions have a tremendous opportunity to reach their younger members by strengthening their communication with parents and grandparents, who are key influences on the financial behavior of children and grandchildren," the study states.

"Credit unions can offer their expertise in creating effective channels through which the entire family will be served. A successful marketing campaign depends upon appropriate product development and focused communication, which appeals to parents as well as to adult children."

Data for Gifts that Connect Generations: A Role for Credit Unions is based on panel surveys of 14,410 households for which the head of household is 50 or more years old. The surveys were sponsored by the National Institutes of Health, and conducted by the University of Michigan. The data reflects all inter vivo gifts of more than $500 given over a two-year period.

"There is an amazing volume of financial information transfer within a family," said Filene Executive Director Bob Hoel. "Young adults tell researchers that their No. 1 source of information about financial issues is their parents. And parents are looking for ways to help their children become more knowledgeable about effective management of family finances. By communicating with both parents and children about inter vivo gifts, credit unions can reach out and strengthen their overall relationship with their members."

Hoel urged credit unions and their CUSOs to establish and promote special programs and accounts to facilitate transfers of wealth. For example, Filene reported that a giver wishing to set up an educational account for a recipient might access a 529 account through the credit union, and the giver and/or the recipient could add to that account. The credit union or its CUSO could also offer brokerage services to open special mutual fund accounts in the name of the recipient and advise the recipients on appropriate investments for the account. And the credit union could offer special accounts in the name of a recipient dedicated for saving for a down payment on a house.

"Such creative ways to assist givers would serve both the giver and receiver, and allow the credit union to play a significant role in the goals of both generations," the authors said.

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