Estate plans are frequently designed to create a legacy that extends beyond a single generation. For this reason, if you are creating an estate plan, you may wish to consider the characteristics of the younger generations – particularly Gen Z – to ensure your estate planning goals are met.
Who is Gen Z?
Gen Z comprises individuals born between 1997 and 2012. They are developing into a well-educated and racially diverse generation. This generation is pragmatic, financially sophisticated, debt averse, charitably inclined and entrepreneurial.
Technology has been a reigning force in Gen Z’s development. They are the first generation to grow up with smart phones and social media in daily life. YouTube, TikTok and videos in general are Gen Z’s preferred learning platform. Their zealous use of technology allows Gen Z to increase their financial sophistication.
Despite their young ages, many are saving for retirement and living frugally. The pandemic increased their financial pragmatism, motivating them to concentrate on finances and planning. The socioeconomic volatility of recent decades has also greatly shaped Gen Z’s view of risk. Having witnessed catastrophic world events, such as terrorism, wars and recession, Gen Zers are adopting a more conservative view of investment and debt.
Despite Gen Z’s sophistication, few feel confident about their financial knowledge, particularly on credit, mortgages and student loans. The volume of information available on their favored internet platforms can be misleading and overwhelming. Because of this, Gen Z may be more vulnerable to fad investments and misinformation.
Gen Z is passionate about work and independent wealth. Many earn money through freelance and part-time work. They value independent work environments and hope to start their own businesses. They also appear to be more charitably inclined than prior generations. Often referred to as “next gen donors,” they prefer making everyday changes as intentional acts of charity.
What should you consider when planning for a Gen Z beneficiary?
These characteristics of Gen Z are particularly informative if you are looking to leave funds to the younger generation. As trusts lasting beyond one generation are popular, there is value in intentionally addressing these generations in your plan.
In recognition of Gen Z’s financial sophistication and pragmatism, you may wish to leave assets in a discretionary lifetime trust, which gives the trustee authority to determine whether a distribution will be in the beneficiary’s best interest. This type of trust can also achieve tax and asset protection planning that may appeal to Gen Zers as they age. The discretionary lifetime trust can be drafted to include carefully crafted incentive provisions to support a Gen Z beneficiary’s goals and values, while ensuring that the trust assets are preserved and used effectively to further these goals. Such provisions seek to encourage certain behaviors by providing financial support and discourage others by restricting access to the trust assets.
Incentive provisions may influence a Gen Z beneficiary to achieve your desired positive outcomes. For example, since many members of Gen Z hope to start their own businesses, you can include provisions authorizing the use of trust assets for the beneficiary to start a business or seek training on proper business practices (such as creating a business plan or working with a consultant). For a Gen Z beneficiary focused on accumulating independent wealth, the trust could authorize the retention of advisers.
The trust can be drafted to support a Gen Z beneficiary’s career choice, including opportunities that may not be financially lucrative. To support these career choices, the discretionary trust can include an income matching provision. If the chosen profession (such as social work, teaching or working for a church) does not provide sufficient wages, the trust can authorize payment of expenses, such as vacation, housing and transportation, without consideration of other resources.
Members of Gen Z are likely to volunteer with nonprofit organizations and engage in political activities. Given this charitable motivation, you can add flexibility to allow the trust funds to further these goals, while teaching the Gen Z beneficiary to be a good steward. For example, the trust can grant a Gen Z beneficiary the ability to make meaningful charitable contributions to the community with the trust assets.
Overall, if you intend for your assets to benefit multiple generations, including family members in Gen Z, you may wish to incorporate their goals and needs in your estate plan. By doing so, your goals may be more effectively achieved.
Greensfelder, Hemker & Gale, P.C. is a full-service law firm with offices in St. Louis, Clayton, Southern Illinois and Chicago. Learn more about the firm at greensfelder.com.
This article has been prepared by Greensfelder, Hemker & Gale, P.C. for general informational purposes only and does not constitute legal advice or an opinion of counsel. Each legal problem is different, and you should not act on any of the information contained herein without first consulting legal counsel. The choice of a lawyer is an important decision and should not be based solely on advertisements.
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