Wealth Management & Financial Planning

Wealth Management & Financial Planning

Understanding the Intricacies of Passing Assets On to Your Heirs

The last 31 years of working with families has brought forth some family dynamics that have remained reasonably similar in nature.  There are other issues that seem relatively new. We enter many discussions with families about special needs beneficiaries. Whether it be a mental or physical handicap, there are emotional, legal and financial issues that need to be discussed. We are prepared for that conversation as it is emotional but somewhat expected. There is another “special need” conversation that needs to occur when it comes to legacy planning in my opinion.

When we started the Financial Enhancement Group in 1997 most of our families had smaller 401k plans but large pensions. When they passed away, the beneficiaries received the modest tax-deferred savings but not the pension. We would see inheritances of $100-250k for the kids.  Though that was not a fortune, it was a real blessing to many, but not enough to disrupt that current state of the beneficiaries’ normal life.

Today the pensions are being eliminated and replaced with seven figure IRA and 401k accounts. Young families working hard to build a family carry a job and live normal Middle American lives are suddenly receiving checks for $500,000 and more. Many times they had no idea they would inherit at that level. The challenges of receiving that gift may sound like a blessing, and it is, but it also comes with headaches.

One major issue is that of enabling bad behavior. It may include excessive alcohol consumption, drug use, gambling or a host of other bad behaviors. We hear parents say that their kids would never be like that and then we witness the results and the aftermath as accounts are drained in much less time than it took to build them.

The marital issue is one more problem as divorce can easily take part of their inheritance if not properly planned for in advance. That doesn’t mean you kids necessarily need a prenuptial agreement.  These are issues you can actually take care of prior to your demise if you so desire.

There are many things you will think can only happen to you once in life. Death is a one-time event for each of us. Passing on our legacy is a one-shot event when done with a conventional mindset. There are estate planning attorneys around the country that have helped families get in front of these situations. It is something you may want to consider.

Sudden financial events create interesting situations. People can change and families often become estranged. The more clear you can be about your wishes today, the better your family will be after you are gone. You need to put the right team in place to help you build and implement the plan. Also it is not a checklist item, which means you can’t visit an attorney one time and assume it will work forever. The investment of time, energy and money are worth it for your heirs.

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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