Seniors are saving their housing wealth for their kids

Now and in the years ahead, baby boomers and older Americans are passing down trillions of dollars to their heirs, according to Federal Reserve data.

And it’s not just those with surnames such as Buffett, Bloomberg and Bezos who stand to receive money when wills are read.

If your parent or grandparent is a homeowner, there’s a good chance you’ll receive an inheritance, though maybe not in the sixor seven-figure realm.

A recent study from the Center for Retirement Research (CRR) at Boston College finds that a large share of senior homeowners express a strong desire to leave an inheritance of at least $10,000. These owners are much less likely to sell their homes before they die or take out an equity loan if they are cash-strapped.

Already, the big jump in home prices has led to housing riches, with $8 trillion held by those 70 and older at the end of 2020.

“Economists have long been puzzled on why so many older Americans that were living at or near the poverty line die as homeowners,” says Michael Eriksen, associate professor at the University of Cincinnati and co-author of the study.

The study points to the desire to leave their heirs their housing wealth as a significant reason why older owners don’t take their housing wealth for their own expenditures.

The easiest way for older, cash-poor owners to take equity “is through a reverse mortgage that provides either an upfront lump-sum payment or annuity,” Eriksen explains. Those funds are repaid when the house is sold or from the owner’s estate after his death.

But in this and related studies, there is evidence that an adult’s child co-resides with his aging parent.

“This potentially solves the cash-poor, house-rich issue as an adult income earner can alleviate budget constraints, provide a level of in-home care to prevent feared institutionalization and enable an easier transfer of housing equity after death.”