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An Estate Planning Follow-Up Discussion
By Rick Kahler CFP® http://www.KahlerFinancial.com
Previously on this ME-P, we explored three fears that stop adult children from talking with parents about their estate plans, even though such conversations could greatly benefit both generations.
These are: “It’s none of my business,” “I don’t want them to think I am greedy,” and, “It will ruin our relationship.”
Parents Fear, Too!
Children aren’t alone in their fear of approaching this topic. Most parents are just as reluctant—and for the same basic reasons. In my experience, parents’ biggest reasons for not talking with kids about legacy intentions are: “It’s none of their business,” “If I share financial information, they will take advantage of me,” and “Talking about money will hurt our relationship.”
Let’s look at each of these:
“It’s none of their business.” This is certainly true, unless you’ve made it their business. If you name a child as an executor of a will, a successor trustee of a trust, or an agent in a Durable Power of Attorney, you have made it that child’s business to know your business.
Shared Decision Making
To throw a child into suddenly having to make financial decisions in your best interest without knowing what they must manage, where assets are held, and what your wishes are is unfair to both you and your child. Any time you put someone in a position of authority in any of your estate documents, it’s essential to carefully go through the document with them and to disclose details of the assets they will make decisions on. Start with showing them your financial statements, the contact information of your trusted advisors, and a listing of where you hold all your accounts.
If you feel you can’t trust a child with such information today, then why do you feel you can trust them as your agent or executor tomorrow? If you don’t trust a child, you’re better off to name a bank trust office or trust company to these positions.
“If I share financial information, they will take advantage of me.” This fear may be justified if your child has a history of taking advantage of you. If not, they probably aren’t going to start now. Preparing a child for an inheritance is not only prudent, it’s also a loving act of kindness you can give your child.
Sudden Money
I have worked with several families where children had no idea of their parents’ net worth. In every case, it was much higher than the kids ever imagined. Suddenly, they learned they were about to inherit hundreds of thousands or millions of dollars in various investments they knew nothing about. I witnessed these heirs try to cope with a plethora of emotions and money scripts, in addition to needing to learn the mechanics of managing a portfolio of investments. Without proper preparation, it’s not uncommon for what parents intended as a loving gift of wealth to turn into a destructive force of misery.
“Talking about money will hurt our relationship.” Parents are just as terrified to have money conversations with their kids as kids are afraid to talk with them. And no wonder—it’s parents who teach kids the no-talk rule in the first place.
Parental Wisdom
As parents, you can exercise the wisdom of age and begin the family money conversations. It may be helpful to have the first meeting with your financial planner or estate attorney, or engage the help of a financial therapist. You might be amazed to find that talking with your kids about money in a straightforward and healthy way can actually help your relationships.
Assessment
Do your kids a favor and break the no-talk rule. It’s a gift to both generations.
Conclusion
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Filed under: Estate Planning | Tagged: annual gifting, Durable Power of Attorney, Estate Planning, inheritance, rick kahler |
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TORMENT
“I am tormented by the guilt of inheriting millions of dollars.” I heard this statement from a young man who had inherited his parent’s fortune. He was being interviewed by George Kinder, founder of the Kinder Institute, at a training session in 2000.
I remember that moment clearly, not so much because of the statement but because of my reaction, which was one of disdain, disgust, and envy. How could anyone who “had it made” come up with such an incredulously heartless, self-centered view of his lot in life? I wanted to shout, “You need to get a grip and grow up. I would love to have the problems you do!”
At that time I was only beginning my own exploration of the emotional issues that complicate our relationships with money. I have since learned how deep and painful these issues can be, regardless of someone’s level of income or net worth.
Yet for many people, the idea that wealthy people may have problems related to money is laughable. A case in point is the reaction to an article about financial therapy published in The Guardian on October 17, 2015. The author, Jana Kasperkevic, focused on the emotional challenges of having wealth.
Because I remember my own early negative reaction to the idea of the wealthy having problems around money, I was not surprised by the vitriol of some of the responses to the article. One in particular caught my attention. Helaine Olen, author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, flamed financial therapists in a post on Slate’s MoneyBox blog on October 19, 2015.
In her post, titled “Why You Should Never, Ever, Ever Take “Wealth Therapy” Seriously,” Olen referred to the financial therapists interviewed by The Guardian as “a bunch of consiglieres to the super-rich, who gave a load of quotes that made me very, very, very sad that Marie Antoinette didn’t have access to their advice before she commissioned an imitation peasant village on the grounds of Versailles.”
Given the context, she obviously didn’t mean “consigliere” as a compliment, but I had to look it up to be sure of its meaning. The word means “advisor” or “counselor” in Italian, but in English is commonly used to describe a top aide to a Mafia crime boss. Seriously? Between organized crime and Marie Antoinette, that one sarcastic sentence contains enough money scripts for a week-long financial therapy workshop.
If you believe a money script that “all rich people are crooks,” as Olen apparently does, perhaps it’s logical to see their advisors as “consiglieres.” Ironically, Olen’s disdainful rant unintentionally reinforces the point of Kasperkevic’s article, that money is often a barrier to connecting with other people and can foster isolation and loneliness.
However, in my research I also found a consigliere described as a diplomat, a trusted counselor, and one of the few who can challenge or argue with the boss. Apparently, this is the advisor who, even within the dangerous world of organized crime, is expected to speak the truth.
That’s actually not a bad description of one aspect of financial planning and financial therapy. Helping clients address emotional challenges around money requires supporting them in uncovering and acknowledging emotional truths even when those truths are painful.
Before engaging financial advisers, then, it’s a good idea to explore whether they have the skills and willingness to act as a consigliere. Ideally, planners won’t expect you to blindly follow their instructions. Nor will they blindly follow yours. Instead, they will have the ability to help you make financial decisions that are in your own best interest.
Rick Kahler CFP®
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And the Executor Is …
In her will, American businesswoman Leona Helmsley left $12 million in a trust fund to her dog Trouble. Her four executors were responsible for seeing that her wishes were carried out. In the years after her death, they dealt with challenges from two disinherited grandchildren, oversaw scores of properties and hotels, negotiated settlements with disgruntled former employees, and managed a huge investment portfolio in a falling economy. What did they ask for in return? $100 million split between them.
The executor to your will may not be as busy or as well compensated as Ms. Helmsley’s. Still, you’ll want to give thoughtful consideration to this important choice. How do you choose an executor? Can anyone do it? What makes an individual a good choice?
Many people choose a spouse, sibling, child, or close friend as executor. In most cases, the job is fairly straightforward. Still, you might give special consideration to someone who is well organized and capable of handling financial matters. Someone who is respected by your heirs and a good communicator also may help make the process run smoothly.
Above all, an executor should be someone trustworthy, since this person will have legal responsibility to manage your money, pay your debts (including taxes), and distribute your assets to your beneficiaries as stated in your will.
If your estate is large or you anticipate a significant amount of court time for your executor, you might think of naming a bank, lawyer, or financial professional. These individuals will typically charge a fee, which would be paid by the estate. In some families, singling out one child or sibling as executor could be construed as favoritism, so naming an outside party may be a good alternative.
Fast Fact:
Michael Jackson chose executors from outside his family to manage his estate.
Source: Billboard.com, March 15, 2016
Whenever possible, choose an executor who lives near you. Court appearances, property issues, even checking mail can be simplified by proximity. Also, some states place additional restrictions on executors who live out of state, so check the laws where you live.
Whomever you choose, discuss your decision with that person. Make sure the individual understands and accepts the obligation—and knows where you keep important records. Because the person may pre-decease you—or have a change of heart about executing your wishes—it’s always a good idea to name one or two alternative executors.
The period following the death of a loved one is a stressful time, and can be confusing for family members. Choosing the right executor can help ensure that the distribution of your assets may be done efficiently and with as little upheaval as possible.
Jason Dyken MD MBA CWS
via Ann Miller RN MHA
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