Planning Through the Generations
- Created on Friday, 14 March 2014 13:33
Multigenerational planning involves the transfer of wealth, but it also extends to intangible concepts such as family values and legacy wishes.
Conversations about multigenerational planning begin with the first generation. The success of an estate plan can depend on whether the details of that plan have been properly communicated to family members. Therefore, it is helpful to be educated on how the estate plan works, proper steps to take and how wealth will be transferred to following generations.
Three main questions help establish a framework for subsequent discussions:
- 1)What are the goals and objectives for the estate?
- 2)How is the estate plan designed to serve the family?
- 3)Does the original estate plan match the current financial situation?
Transferring Wealth to the Next Generations
Once you are comfortable with how the estate plan functions, talking to the second generation (in most cases, your children) is an appropriate next step. The tendency might be to focus on issues that are strictly financial in nature, not on preparing them for their impending responsibilities. An estate plan is likely to fail if family members are unprepared or communications break down within the family unit.
The following questions can be useful when thinking about how to start a conversation:
- Are you comfortable sharing details of your estate plan with your family? Are you comfortable sharing information with the spouses or partners of your children?
- Have your children been informed that a plan is prepared? Have they read it?
- Do they know your advisor and attorney?
Family members should be aware of the responsibilities of wealth and the impact it has on the family. A wealth transfer is more likely to be successful when there is a plan in place to prepare them for future responsibilities.
When estate planning extends beyond children to the next generation, it often involves providing for future education costs. For grandparents who wish to provide financial support for their grandchildren’s education expenses, generation skipping can be a useful tool.
Strategies to Help Prepare the Next Generations
If you hesitate to involve the next generations because of their inexperience with money, the following can be starting points:
Inexperience with handling money and managing budgets
- Include family members in the management of assets before a wealth transfer occurs.
- Give family members the opportunity to read all estate plan documents and ask questions about their contents to gain a better understanding of what will occur with the transfer of wealth.
Concerns about overemphasis on material possessions
- Invite younger children to become involved in philanthropic activities by making monetary donations and volunteering their time.
Concerns that spending will lead to overspending
- Set different distribution start dates for each individual instead of using a generic age.
Calling a Family Meeting
When the entire family participates in important decisions, others in the family will begin to recognize that family unity is something to be valued. This requires that the family communicate regularly with a majority of conversations being productive and positive.
The benefit of family meetings is to discuss how the estate plan works as well as bringing the generations together. All family members can be informed about how they will be affected and what the plan will look like when triggered. Family meetings can also help set the expectations of values and ethics, spending, charitable giving, and planning for future generations that are to be carried on throughout the family legacy. A family meeting also opens up a dialogue if there is a need to create a separate trust for children or grandchildren to protect the family wealth from potential problems.
Advisor Support Roles
As family needs dictate, an advisor can be there to offer assistance, support and expertise by:
- Reviewing the current estate plan to ensure it matches your defined multigenerational planning goals and objectives
- Working with your attorney to relay how your goals and objectives should be incorporated into the estate plan
- Establishing a relationship with your children to act as a resource as they experience life events such as purchasing a new home or motor vehicle, and planning for their children’s education
- Preparing for or facilitating family meetings
- Addressing goals that require charitable gift planning, such as gifting an overall percentage of the estate to charity or gifting a future lump sum, which can be included in the estate plan with tools such as donor advised funds, charitable remainder trusts and gifting of appreciated securities
Conclusion
The primary purpose of planning is to efficiently transfer family wealth. As a sometimes unexpected benefit, openly discussing goals and objectives can also strengthen relationships throughout the entire family.
Copyright © 2014, The BAM
Later Life Planning: No One Said It Would Be Easy - Brian Zdrowak
- Created on Wednesday, 12 March 2014 09:57
This past October, as I was flying back from
Since I had plans to visit
As I looked over my parents’ information, I did so fully aware that they are very independent and have a stubborn pride (that’s where I get it). Therefore, to be helpful, I needed to be both honest and gracious.
We met a few weeks ago and had a great conversation. I learned my parents had different goals in retirement: My dad wanted to travel and never have to worry about buying something that he wanted, while my mom was the opposite, worrying about making their savings last and trying to cut costs. At some point, I realized my parents did not talk — I mean really talk — about money. You don’t stay married for as long as they have without some level of discussion about money. It appeared, however, that my parents were struggling to address some tough money choices, something they probably had not done since I was a child. My personality is such that I love to help others and especially like to assist in fixing problems. (My wife calls me Mr. Fixit.) I left our meeting thinking, “All fixed” — it appeared all that my parents needed was a few hours with Brian.
Reality set in about a week later. I called my parents, excited to find out what parts of our discussion had been put into place. I found out instead that they had decided to wait until May/June to start with the plan. I cannot remember the reason for their delay; most likely it was the thought of changing what they had been doing financially for more than 40 years. The point is, sitting down as a family, talking about finances and plans for later life can be upsetting, surprising and a bonding experience. My mistake was thinking this can be a one-and-done meeting.
Change takes time, especially as we get older and become entrenched in our routines. Therefore, ask questions, listen and be patient. No one ever said that doing the right thing would be easy.
Copyright © 2014, The BAM
College Planning 201 A Q-and-A With Lynn O’Shaunessy
- Created on Friday, 14 February 2014 08:22
College planning can be stressful. There are too many schools and too many forms. We spoke with Lynn O'Shaughnessy, the author of The College Solution: A Guide for Everyone Looking for the
Q: What prompted you to write about choosing a college?
A: Through my book and blogs at The College Solution and CBS MoneyWatch, I help families with college-bound teenagers find the best academic matches possible, whether public or private, for the least amount of money.
Q: What do you mean when you say college price tags are virtually meaningless?
A: Today, college degrees are priced like airline tickets. When you take a flight, probably everyone in your row has paid a different price. It's the same with colleges. Colleges value teenagers differently and will give better prices to students they really want to attend their school. This is true even if you are affluent. Every school has its own priority list for the types of students it wants to attract. To get those kids to attend, colleges have to kick in some money.
Q: Should affluent parents fill out financial aid forms?
A: Many affluent parents should fill out financial aid forms. Lots of families assume that they won't receive need-based aid, but affluent families can be eligible if a college is expensive. For instance, a family making between $150,000 and $200,000 could get up to $25,000 in need-based aid if the student attends an expensive college with excellent aid policies. An affluent family will significantly increase their chances for need-based aid if there is more than one child attending college.
Q: When did merit awards become the norm?
A: It started in the 1990s. It used to be that schools would save their money for low-income kids, and then a handful of scholarships for brainy kids. Then, people started focusing on U.S. News & World Report's rankings, and it became a high-stakes game for colleges and universities to inch up the prestige ladder.
Q: And that's merit based?
A: Tuition discounts can refer to the price cut that schools give to students whether or not they qualify for need-based aid. Remember that state schools are also trying to attract bright kids from outside their own state by giving them tuition cuts.
Q: Regarding the rankings, why are evaluations of schools often superficial?
A: U.S. News & World Report evaluates colleges based on factors that have nothing to do with the quality of the education that students receive. The biggest factor in the rankings is the general reputation of a school. The rankings also depend on the exclusivity of a school and the average test scores and grades of incoming freshmen. Those measurements tell you nothing about what kind of education students will encounter at an individual school.
Q: What can a student do to stand out from the rest with a college admissions office?
A: The biggest factors in college admission are grade point average and the rigor of a student's high school courses, followed by SAT and ACT scores.
Q: If you could give parents just one suggestion, what would it be?
A: The best thing that parents can do is to tell their children not to stress so much. Seventy-nine percent of high school seniors get into their No. 1 college choice. The college admission process is not as competitive as students and parents think.
About Lynn O'Shaughnessy
Lynn O'Shaughnessy is a best-selling author and nationally recognized expert on college planning. She writes a blog for CBS MoneyWatch and her website, The College Solution.
A Look at How America Saves for College
According to a Sallie Mae study, a majority of American families expect their children to attend college. The reasons that parents start to save for college vary as much as how they choose to save.
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Copyright © 2014, The BAM