Helping Families Navigate the Financial Challenges of Age Transitions

Category: Family Relationships (Page 3 of 5)

The Financial Impact of Dementia

In the video below, Robert Powell, editor of The Street’s Retirement Daily, and Angie O’Leary, head of wealth management with RBC Wealth Management, talked about the need to plan ahead for the possibility of dementia and the type of plans to put in place.

According to O’Leary, the plan should include having key legal documents – a power of attorney, healthcare directive, and will – in place as well as having assets properly titled and beneficiary designations current. Consider too, she said, the benefits of a trust and professional executor services, as well as supplemental insurance, including long-term care options.

O’Leary also noted the need to understand early warning signs and, after a diagnosis, acting swiftly to protect the family from financial missteps, abuse and liability.

 

Having a plan is essential, and key legal documents—a power of attorney, healthcare directive, and will—should be in place.

Source: The Financial Impact of Dementia – TheStreet

If you are struggling through the financial transitions of aging, Wealth and Honor is here to provide you with resources to help you and your family through it.

Not So Green Acres

In this episode of The Case Files, I profile a 2010 Texas case involving a daughter’s misappropriation of her deceased father’s trust funds as well as her aging mother’s personal assets. The characters from the 1960s sitcom Green Acres provide a little humor to an otherwise serious situation. Enjoy and learn!

https://youtu.be/cVZsNE85HbE

Financial Planning Does Not End at Retirement

With the new year, I’ve entered my 36th year in the financial services industry. Just writing this fact feels strange. I’ve never characterized myself as a veteran of the industry, feeling instead that I’ve just hit my stride. The years however tell me differently and it’s easy to understand how senior professionals can feel marginalized. I chose a doctor several years my junior so that as I aged, he’d still be in practice. Understandably now, clients want to know who my back up is “just in case.”

The financial planning industry has done an admiral job of preparing people for two pivotal moments: Retirement – that magic age when one stops earning a paycheck, travels the world, plays golf every day, and enjoys a life of leisure; and Death – the final moment beyond which our assets and legacy are left to our heirs. It has done a poor job of equipping advisors to address the financial planning issues of the period in between. Sure, advisors sell long term care insurance to forty and fifty-somethings for this period, and others sell annuities to seniors skittish about the financial markets, but these are product solutions aimed at the senior market, not financial planning discussions. In a similar way, a walker solves an issue with balance and prevents falls, but a walker is not a comprehensive plan for health and wellness throughout life.

While there are several common financial planning issues for every age demographic, there are also many unique financial planning needs of the senior market.

Common Financial Planning Issues

  • Ensuring adequate cash flow throughout life.
  • Evaluating and addressing risks to financial independence.
  • Determining the financial impact of major life events.
  • Minimizing income tax.
  • Allocating investment resources to accomplish current and future goals.
  • Defining a plan for the distribution of accumulated assets at death.

Financial Issues Unique to Seniors

  • Plan for downsizing or home modification
  • Relocation plan if distant from family
  • Plan for continued social engagement
  • Family business succession
  • Identity and fraud protection
  • Annual Medicare elections
  • Developing a dependency plan to include
    • Living arrangements
    • Persons in charge of financial decisions
    • Persons in charge of healthcare decisions
    • Transportation needs

It’s tempting to ask how a plan for continued social engagement is a financial planning issue. With social isolation a major contributor to poor health among seniors[1], and healthcare costs absorbing a significant portion of a senior’s resources, a plan for social engagement as we age should be an integral part of the financial planning conversation with seniors.

Annual Medicare elections are another example of an often-confusing labyrinth of decisions that can have significant financial impact for years.

Identity theft and elder financial fraud are estimated to cost seniors between $3 and $30 Billion a year[2], and nearly everyone I know over age 70 has been targeted. A plan that includes identity theft protection as well as vulnerabilities to undue influence inside of familial relationships needs to be included.

Plans for living arrangements, whether aging in place, or facility care, should be discussed long before the actual need arises. Just as saving for retirement doesn’t begin at age 65, neither should plans for where someone lives out the remainder of their life be delayed until the 11th hour.

Family meetings to discuss an aging client’s dependency plan should be also be held long before a dependency event occurs. It helps assure family members that a plan is in place, informs them as to who-does-what-when, and when done early enough and under the direction of the aging client, preserves his or her seat of honor at the head of the table.

Family Business Succession has been a central component of financial and estate planning for years and is the least neglected area of financial planning for seniors among those who own a multi-generational family enterprise. Still, nearly 60% of the small business owners surveyed by Wilmington Trust, do not have a succession plan in place[3].

In conclusion, financial planning does not end at retirement. As one client reminded me years ago, “retirement is just another word for thirty years of unemployment.” It doesn’t look the same for all seniors but when practiced with integrity, it can be extremely beneficial to the entire family, and rewarding for the financial planner who chooses to serve this market.


[1] National Institute on Aging. (2020). Social isolation, loneliness in older people pose health risks. [online] Available at: https://www.nia.nih.gov/news/social-isolation-loneliness-older-people-pose-health-risks [Accessed 7 Jan. 2020].

[2] Consumer Reports. (2020). Financial Elder Abuse Costs $3 Billion a Year. Or Is It $36 Billion?. [online] Available at: https://www.consumerreports.org/cro/consumer-protection/financial-elder-abuse-costs–3-billion—–or-is-it–30-billion- [Accessed 7 Jan. 2020].

[3] Usatoday.com. (2020). [online] Available at: https://www.usatoday.com/story/money/usaandmain/2018/08/11/most-small-business-owners-lack-succession-plan/37281977/ [Accessed 7 Jan. 2020].

Casey Kasem children settle their wrongful death case against his wife

Kerri, Julie and Mike Kasem have asked a judge to dismiss their wrongful death lawsuit against their stepmother, Jean Kasem, 64, as part of a settlement after a four-year legal feud.

While these cases make the headlines due to the celebrity status of the parties and the amount of money involved, dramas like this for much smaller amounts happen all too frequently. Death and money can bring out the worst of family dysfunction.

How can families prevent this kind of outcome? There is no simple answer, and if the dynamics among the family are already toxic, then it’s even more important that families have a solid, written plan in place before incapacity strikes. It may not have prevented the accusations of wrongful death between the parties, but it could have created a structure of care and wealth distribution that could have neutralized or minimized any incentive for the parties to commit a wrongful death offense.

Unfortunately, no estate plan can prevent an immoral or illegal act; nor can it instill character in the lives of others.

Source: Casey Kasem’s children settle their wrongful death case against his wife | Daily Mail Online

Should families be concerned with inherited wealth?

A recent article written by Joe Pinkster for the online magazine, The Atlantic, discusses the issue of inheritance, and specifically whether there exists a magic number that represents an inheritance that is too large[1]. This question has become relevant for many reasons, one being that some wealthy parents are concerned that after a certain point, money passed down will be damaging to the next generation, removing the incentive to be productive contributors to society.

This is not a new question. King Solomon in the Old Testament, clearly pondered the same question during a particularly dark time in his life:

I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me.  And who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. This too is meaningless.  So my heart began to despair over all my toilsome labor under the sun. For a person may labor with wisdom, knowledge and skill, and then they must leave all they own to another who has not toiled for it. This too is meaningless and a great misfortune.

ECCLESIASTES 2:18-21 NIV

The question is, should this be a concern of most families given the fact that most people won’t receive vast fortunes from their parents? In fact, research by the Federal Reserve indicates that 85% of inheritances between 1995 and 2016 were less than $250,000 and most were less than $50,000.[2]

From my personal life and professional experience, I have formed this observation: sudden money will bring out a recipient’s best or worst financial behaviors to the degree that they have been prepared for it, regardless of the amount. This is not to say that mistakes with inherited money are necessarily a bad thing. Speaking for myself, the lessons that I have learned through failure are some of my more life-changing ones, and I wouldn’t trade the failures for successes without the lessons.

For those inheriting less than say, $50,000 – the impact of learning through failure isn’t as financially devastating as burning through $5 Million. Older parents who are concerned about their adult child’s ability to manage up to perhaps a $150,000 inheritance may want to consider these less elaborate (and less costly) options than leaving their assets in trusts or other complex arrangements:

  • Leave it to them unfettered and simply let them do their best with it and hopefully learn a valuable lesson in the process. Losing $50,000 for buying an RV rather than saving it for retirement may be a painful lesson, but one they can likely recover from.
  • Consider leaving the money to a grandchild’s education account such as a 529 Plan, instead of outright to the adult child-parent.
  • If the inheritance is paid through an insurance policy, discuss the policy’s settlement options (how the death benefits are paid to a beneficiary) with your insurance agent. One option may be the payment of a monthly amount spread out over a number of years which cannot be altered by the beneficiary.

One exception to these simpler options is if the adult child has a physical or mental disability and receives government assistance such as Medicaid. In such case, working with a Medicaid attorney to create what is known as a Special Needs Trust, may be necessary to preserve these benefits, but this has little to do with the behavioral issues that concerned Solomon or many families today.

What about the small percentage of significantly larger inheritances? Should families be concerned about how the sudden impact of substantial financial windfalls will affect those who inherit? My response is a resounding YES not only to preserve the wealth left to these beneficiaries (The Sudden Money Institute, a think tank and financial consultancy specializing in planning for life transitions such as inheritances, claims that 90% of inherited wealth disappears by the third generation), but also because inheriting sudden wealth can be difficult emotionally as well.[3] 

For over two centuries, wealthy Americans have used trusts and other elaborate means to preserve family wealth or family-owned business enterprises, control heirs’ behavior from the grave, or provide financial tutelage until heirs demonstrate the ability to responsibly handle their wealth. Trustees – those who control the purse-strings for these wealthy heirs – are required by law to act in the best interest of these heirs. A good trustee will assume the roles of surrogate and mentor with the beneficiaries under his care and like a good parent, will sometimes allow the beneficiary to fail small in order to learn valuable lessons for when the beneficiary may have responsibility for a much larger fortune later on.

However, no estate plan can instill character regardless of the sophistication of the plan. A healthy work ethic, compassion, integrity, loyalty, fidelity… these are ultimately behavioral choices we all must make, no matter how wealthy we may become.  Perhaps this was Solomon’s true lament.


[1] Pinsker, J. (2019). How Much Inheritance Is Too Much? [online] The Atlantic. Available at: https://www.theatlantic.com/family/archive/2019/10/big-inheritances-how-much-to-leave/600703/ [Accessed 29 Oct. 2019].

[2]   Source: Survey of Consumer Finances, Federal Reserve Board. Last update June 1, 2018. https://www.federalreserve.gov/econres/notes/feds-notes/how-does-intergenerational-wealth-transmission-affect-wealth-concentration-accessible-20180601.htm

[3] “Financial Psychology and Lifechanging Events: Financial Windfall,” National Endowment for Financial Education.

Former rugby star accuses brother of mismanaging family trust

In yet another case of family member trustees gone wrong, Former St George Illawarra Dragons star Mark Gasnier has accused his brother of taking funds from a family trust as part of a long-running dispute.

Mark Gasnier and his brother Dean, are co-trustees of a family trust apparently established by their parents. According to the complaint, Dean, without the knowledge of Mark, made a number of withdrawals from the family trust and even went as far as faking the signatures of his parents John Gasnier and Janene Gasnier on financial documents including tax returns. The case is headed to the New South Wales Supreme Court.

Appointing an institutional corporate trustee might have prevented the dispute since corporate trustees typically include layers of checks and balances designed to prevent unauthorized withdrawals from occurring. If families still want someone within or close to the family involved, then appointing them as co-trustee with limited authority is a possible solution.

Perhaps this sibling rivalry should have been left on the Rugby pitch!

Source: Mark Gasnier accuses brother of mismanaging family trust

Addressing the 800lb gorilla: Most financial scammers of the elderly are family.

A recent Barron’s article discusses ways in which adult children can protect their parents from financial fraud. Elder Financial Abuse is estimated to defraud older Americans of somewhere between the disparate estimates of $3Billion to $35Billion a year. The large disparity is due to the number of data sources, and estimations of unreported abuse, but suffice it to say, it is a problem.

While the elaborate means scammers take to defraud our aging parents of their resources are popular to write about, focusing on these threats ignores where 85-90% of defrauding takes place – within the immediate family of the victim. According to a report by the National Committee on Aging,

Over 90% of all reported elder abuse is committed by an older person’s own family members, most often their adult children, followed by grandchildren, nieces and nephews, and others.

Source: National Committee on Aging

My friend and colleague, Cynthia Healy, has years of experience investigating elder financial abuse, and she produced this short segment on family theft. Other resources can be found on her website gogrey.com.

The best way to address this 800 lb gorilla is to teach the virtue of honor in our family systems, and specifically how honor shapes the attitudes or actions that we take towards our elderly parents and/or their resources. Much of the familial elder financial abuse is subtle and occurs out of a sense of entitlement, the perpetrator justifying his actions under the guise of “mom won’t miss this.”

Still for those adult children who do honor their parents and their parents’ possessions, these articles offer practical and relational advice.

To help aging parents protect themselves, their grown children must tactfully broach the subject of their vulnerability. The key is to adopt an attitude of empathy and non-judgment, says Amy Nofziger, director of fraud victim support at AARP, an advocacy organization for older Americans. “Always start the conversation with empathy and compassion, and don’t be paternalistic,” she advises.

Source: Advisors Offer Precautions on Keeping Financial Scammers Away. – Barron’s

Daughter of woman whose partner predeceased her mother by 12 days, in court fight over inheritance.

A woman fighting for her multi-million dollar inheritance might have to forfeit the entire fortune to charity thanks to a poorly-written will — a case that has raised questions about the rights of unmarried gay couples and their children.

Jill Morris, died of breast cancer in 2016 at age 84 and left a multi-million dollar estate to her long-time partner, Joan Anderson, with whom she had an 18 year relationship. Anderson died of a stroke just 12 days after Morris, and, according to Morris’ last will and testament, her estate was to be divided among three charities if Anderson did not survive her by thirty days.

A Manhattan Surrogate Court Judge has ruled that the estate belongs to the charities. Emlie Anderson, Joan Anderson’s daughter claims the judge should have known that Morris would not have included such “harsh wording in her will.”

It’s upsetting to me. It’s like they’re trying to negate my mother and her relationship with Jill, she told the Daily News. That’s what they’re saying, that their relationship wasn’t important.

Source: Woman fighting for late mother’s inheritance plans to appeal after Manhattan judge decides multi-million dollar fortune should go to charity – New York Daily News

What is your honor code?

Sometimes hearing a familiar principle from a different cultural context makes it seem more interesting, less banal; the same way that eating pizza prepared by a street vendor in Rome would taste better than my local delivery pizza simply because it was made in Rome. Most westerners are familiar with the fifth commandment in the Bible:

Honor your father and your mother, as the LORD your God has commanded you, so that your days may be long and that it may go well with you in the land the LORD your God is giving you.

Deuteronomy 5:16

However, other cultures and traditions also incorporate the concept of honoring elders into their belief systems as well.

Take also the concept of Filial Piety – one of the eight virtues of Confucianism. Scholars attribute the Eight Virtues to a line in the Sage Emperor Guan’s Book of Enlightenment:

“It is through Filial Piety, Sibling Harmony, Dedication, Trustworthiness, Propriety, Sacrifice, Honour, and Sense of Shame that we become fully human.” 

Filial Piety means to be good to one’s parents; to take care of one’s parents; to engage in good conduct not just towards parents but also outside the home so as to bring a good name to one’s parents and ancestors. The Fung Loy Kok Institute of Taoism expounds on this general definition:

  • What is filial piety? There are many aspects of filial piety. The most important of them is to honor your father and mother and attend to their needs.
  • By “honor” it is meant that you should maintain good conduct and never do things which will shame your parents or make them unhappy.
  • You should be hard working in family affairs.
  • You should be frugal in spending and not waste family resources.
  • Siblings should live in harmony.
  • In your interactions with other people you should be honest and sincere. Do not be deceitful. In all your actions be humble, be courteous and considerate of others, be proprietous and refrain from shameful thoughts and actions.
  • You should also attend to your parents’ well-being. There are three basic needs you must provide for your parents. First, you should provide for their food and clothing. Second, when they are ill, you must take responsibility for nursing them back to health. Third, when they die, you must provide them with proper burial and care for their graves.
  • As a son or daughter, whether you are rich or poor, whatever profession you are engaged in, whether you are married or not, whether you have children or not, if you can perform these three deeds with sincerity and dedication, your parents will be happy while they are alive and rest in peace when they are deceased. Your parents cared for you without selfish interests. Your mother carried you in her womb for ten lunar months and nursed you for three years. Your parents constantly tended to your needs while you were growing up. You should show your gratitude to them by fulfilling the virtue of filial piety. Filial piety has many aspects. As long as each is performed with all your heart, this virtue is fulfilled. Whatever you do for your parents, do it with goodwill and sincerity.

I think we can all agree that the world could use a little more Filial Piety.

Estate Planning Pitfalls for Older Couples Living Together.

An increasing number of Americans ages 50 and older are in cohabiting relationships, according to a new Pew Research Center analysis of the Current Population Survey. In fact, cohabiters ages 50 and older represented about a quarter (23%) of all cohabiting adults in 2016. One reason could be the adult children’s rejection to their older parent’s marriage, especially if the relationship formed soon after the death of the other parent. Approximately 23% of cohabiters over age 65 are widowed.

However, as with many things in life, what seems simple — living together — is often quite complex. Unmarried couples, of all sexual orientations, can face a variety of problematic and emotionally difficult issues because estate planning laws are written to favor married couples.

Unmarried partners need to consider the following issues related to estate planning and living together:

  1. Medical incapacity: In the absence of a durable power of attorney for healthcare, non-married individuals may be treated as “legal strangers” and unable to make healthcare decisions on behalf of their partner.
  2. Living arrangements: If the wealthier partner dies or becomes incapacitated with no provision for the other partner to remain in the home (by a will or title) the other partner can be forced from the home by blood kin.
  3. Dying without a will: Intestacy laws (state laws that determine where a deceased’s property goes when there is no will) are not favorable to unmarried partners.
  4. Employer Retirement Plans: Plans like 401k’s, profit sharing, and pension plans, as well as group life insurance plans are governed by a federal law known as ERISA. This law requires that a spouse be the beneficiary of these plans in the event of the employee’s death unless waived by the spouse. No such protection is afforded unmarried partners unless the partner is listed on the Plan’s beneficiary form.

For more, see Brad Wiewel, The Legal Dangers of Living Together, Next Avenue, August 28, 2019.

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