from the July 14, 2008 edition

Wake up, baby boomers. Despite frequent media references to a $41 trillion generational wealth transfer in the United States from 1998 to 2052, the vast majority of Americans should not expect to get rich from an inheritance.

"Inheritance is a privilege, not a right," says Nancy E. Frank, a financial planner in New York City. Her advice to those fortunate enough to receive an inheritance: "Live life as if you haven't inherited money."

For most baby boomers, an inheritance will not be part of their future. According to a 2006 AARP study, 19 percent of boomers ages 44 to 62 had already received an inheritance with only 15 percent still expecting one.

Wishful thinking regarding inheritances also extends to the amount of money that will be received. The median inheritance reported by AARP is $49,000, barely enough to pay for one year at a private college. Only 2 percent of baby boomers who got an inheritance received more than $100,000, according to Tiburon Strategic Advisors, a financial-services consulting firm in Tiburon, Calif.

Jeff Camada, a financial planner from Jacksonville, Fla., urges his clients to be self-reliant.

"Our experience is that clients with wealthy parents of $2 million or more in assets have no expectation of an inheritance given their parents' longevity and soaring healthcare costs," he says. "Boomers are concerned that their parents enjoy their lives."

Yet many boomers are hoping that an inheritance will bail them out of a retirement shortfall. Only 38 percent of those ages 45 to 55 and 41 percent of those 55 to 65 have more than $100,000 saved for retirement, not including their primary residence or defined benefit plans, according to an April survey by the Employee Benefit Research Institute.

So here's why less than one-third of all boomers can expect to get an inheritance:

•Retirement costs have soared over the past few years. In particular, healthcare costs have increased at double-digit levels with Fidelity estimating that retirees will need $225,000 in retirement to cover non­insured healthcare costs.

•Longevity is increasing, with almost one out of three 65-year-old women and one out of five 65-year-old men living to age 95, according to TIAA-CREF.

•Portfolio returns are expected to fall from an average annual 8 percent to at best 4 percent. Meanwhile, housing values have declined 19 percent over the last two years, according to the S&P/Case-Shiller home-price index, erasing much housing equity.

•Defined benefit pensions with guaranteed payouts have been replaced by less-secure 401(k) savings plans.

Despite these trends, some boomers will come into money.

Michael Des Bles, a retired mortgage banker from Windermere, Fla., is an only child born to Depression-era parents who lived comfortably, but not excessively.

His father, a regional manager for Allstate Insurance, took advantage of stock options and his pension investments to retire at age 60.

While finances were never discussed in the family, his father invested conservatively, primarily in blue-chip stocks. He also volunteered to provide the mortgage for Mr. Des Bles's home by taking a lien position and modeling his investment as a 30-year mortgage, which Des Bles paid back at a rate lower than any available at a bank.

When his father died in 1990, Des Bles was surprised to receive a six-figure inheritance.

"It was 10 years before I reallocated my parents' portfolio, which was primarily concentrated in equities," he says. "Before I did so, I consulted a financial planner to advise me on an asset-allocation plan."

When thinking about an inheritance, adopt the following guidelines:

1. Do not anticipate that you will receive money from your parents.

2. Don't treat an inheritance as a windfall. Recognize the psychological overtones of an inheritance and guard against emotion-driven spending.

3. Respect your inheritance as much as any dollar earned. Strip away a small percentage, 2 to 5 percent, of your inheritance to buy something that you will treasure – perhaps a piece of jewelry, foreign travel, or antique furniture. But invest the remainder as part of a prudent asset-allocation plan.

4. Encourage a family discussion of finances. Assure your parents that their fully paid retirement is the most important gift that they can give you. And make certain that they have anticipated inflationary pressures and healthcare costs in their budget, prior to providing any gifts to children or grandchildren.

5. Consult with an attorney, accountant, or financial planner to reduce taxes and leverage your inheritance.

• Dr. Kathleen Connell is a professor at Haas Graduate Business School, University of California, Berkeley.