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Here Honey, Take It All!

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Then vs. Now

When I first began my Financial Advisory business twenty-eight years ago in San Ramon, we were taught that:

Every family will was set up for the surviving spouse to inherit every asset, tax-free, from the deceased spouse.

Children and charities generally receive no inheritance until the second spouse dies.

Do not bother setting up meetings with adult children and their parents to discuss family wealth as parents are just too close to the vest to share their information (and perceived their adult children as greedy and wanting their money while they were still alive).

Discussing Family Wealth: The New Normal

Times have really changed and we have adapted!

Today, we now recommend you have the “Family Money Talk” as soon as possible so the next generation fully understands the desires of their parent(s).

What You Should Know

Here are some statistics that underlie the importance of discussing family finances:

  • Money is the leading cause of stress in a relationship. 35% of people named finances as the primary trouble spot with their partner (SunTrust Bank).
  • 70% of married couples argue about money—more than any other topic (Money Magazine).
  • 41% of divorced Gen Xers and 29% of Boomers say they ended their marriage due to disagreements about money (TD Ameritrade). 
  • Seven in 10 parents age 55 and older expect one of their children will help them manage their investments in retirement, but 36% of the adult children identified for the role don’t know Mom and Dad have mentally assigned them the task (Fidelity).

Here are some steps to help protect family wealth and your financial dreams.

List of Steps

Step 1: Sit with your Financial Advisor and map out your Financial Goals and Dreams

Most of us will want to structure the distribution of our assets to support the next generation in staying productive, motivated, and focused on their own goals.

Step 2: Have a planned intergenerational wealth meeting

Discuss the family assets in the context of the family values, mission, and shared dream. Talk about the family wealth as a tool that creates opportunities, rather than something that destroys ambition or dreams.

Step 3: Discuss where the assets should go

Flowchart them out.

Step 4: Discuss the potential for long-term care

Have a planned discussion about the potential for needing long-term care and what to do if poor health enters the family life. This may be decades away, but in my family, good health changed to poor health over a weekend and my parent never returned to good health.

Step 5: Discuss charity

Discuss charity, perhaps setting up a foundation and what is important to you. Remember that every penny that goes to charity will not go to the next generation, so this can be contentious.

Step 6: Discuss why fair might not always be equal

Understand the difference between being fair and being equal with your children. They are very different. Fairness often falls into more of a subjective or situational realm, and equal is qualified more objectively and concretely.

Step 7: Review all beneficiary forms and make sure they are up to date

It’s smart to review all beneficiary forms regularly, simply because you may have changed your mind since first naming your beneficiaries.

Step 8: Consider life insurance

Now may be the time to discuss leveraging your assets with Life Insurance, if you qualify.

Step 9: Discuss your grandchildren and their financial needs

Review college funding and generation-skipping trusts.

Step 10: Share all pertinent information with the next generation

Share where your important papers are, who and why you chose the Executor and the name and contact information of your family attorney.

Step 11: Make sure you share only the information which you wish to share

You don’t necessarily need to disclose your full net worth. You can give a high-level overview of your general financial standing, plans and goals, wealth structures, and future wishes.

Step 12: Be mindful of how money can be a stressful topic

Here is a great way to alleviate the stress of financial conversations: share an important life lesson you wish you’d known earlier. Talk about how it impacted you at the time, or even perhaps over the course of your lifetime. This discussion will help continue your kids’ financial education, regardless of their age. And sharing your story opens the door for further financial dialogue.

Families are complicated—and wealth multiplies that complexity.

Unfortunately, it’s all too common to witness sibling estrangement after the Will and Trust are executed. So much energy is depleted on unresolved family conflict. I have seen this all too often and it is so easy to avoid.

So, these twelve steps may be the difference between your children having a positive relationship after you’re long gone, or never talking again. Never give up on developing a positive conversation around family wealth. There is always common ground.

Elliot Kallen, Fiduciary Financial Advisor in San Francisco Bay Area

As always, I look forward to meeting with you over the phone or virtually through Zoom.

All my best, and Happy Valentine’s Day,

Elliot Kallen Signature B

Expert Insights

Elliot Kallen Signature 5

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