Wealth Management & Financial Planning

Wealth Management & Financial Planning

Coming Clean With Your Advisor, Your Children, Their Spouses and Your Grandchildren

Some say telling only part of the story is a little white lie while others find it to be standard protocol. This article is the second installment in a four-part series of things you will wish you told your financial advisor. Point: little white lies lead to financial devastation; this is about your children, their spouses, and your grandchildren.

Managing assets is a fine intricacy of asset allocation, tax considerations, and estate planning combined with the never-ending possibilities of life. Over the years we have heard some family’s intentions of passing the last dollar to the pallbearers! Though that might sound like a plan, we never know the day we are going home, making the leaving behind of our financial assets a game of Risk.

In the game of Risk, you challenge other players by the roll of a dice to conquer their territories based on the size of your armies.  As much as that appears to be luck, my experiences prove that the winner is often the same player. Like it or not, strategies matter.

You can essentially leave money behind to charities, children, and others.  The most likely is charities & children.  Charities will be another article, so we will devote the next words to children.

As you start the legacy process, keep in mind that it is not just your children but also their spouses.  Some would refer to them as outlaws rather than in-laws! You have three types of recipients in our experience: those that treat resources as you would have; those that spend differently than you would have; and the worst case, those that have habits you accidentally enabled.

The easiest is the first scenario. This situation calls for a tactical strategy, protecting your children from others more than themselves.  Maybe they are overly charitable or gullible to unsuspecting family, similar to a lottery winner that has family they have never met but comes to Thanksgiving for the first time. This can be addressed in legal trusts and probably should be for those prone to naturally helping others.

Protecting assets from marital property are difficult especially when the asset is passed after a long term marriage.  There are never guarantees that assets are protected in the event of a divorce, but proper transfer documents can help. For instance, my daughters will receive assets over ten years when we pass giving them both three chances to make mistakes and their spouse three opportunities to leave if that will ever happen.

The saddest case often includes gambling, drug, and alcohol issues.  How do you leave money behind to children that are not making responsible decisions for themselves? This requires a plan and legal documents that go beyond the normal scope. Our trustees have the power to suspend payments to our children if they feel that the misconduct is detrimental to their well being.

The key is that many issues can be handled with the proper legal documents, but there are always trade-offs. Decide what matters most for you and them.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.

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