She’s elegant. She’s wise. She’s Queen Elizabeth mixed with a hint of Princess Margaret’s fun. Her children respect and love her; her grandchildren adore her. She reads the New York Times and the Wall Street Journal daily and she knows how to use her iPhone. She’s witty, lovable, and sharp. Her house is in an upscale neighborhood and organized with zero clutter (not even in the drawers!). Her husband (a titan of industry) passed away almost a decade ago. With pride, she lives independently and still has spunk in her.
She has everything she ever wanted and is past the point of wanting more. However, she has a nagging feeling about the destiny of her sizable fortune. She wants to leave her substantial wealth to her adult children. They get along now, but she wants to ensure that after she is gone that the kids will not fight over the red tricycle.
When it comes to passing down wealth and last wishes, I’ve witnessed success and sadly, on the other hand, I’ve seen feuds and litigation. The negative outcomes tend to happen when there is either too much complication or at the other extreme, lackadaisical (or a complete lack of) planning. An internet legal document is not sufficient!
I recall a sweet elderly couple who did not clearly communicate their wishes in their legal documents. They assumed their verbal wishes would be carried out, and the end result was abuse of funds. I can imagine these sweet people rolling in their graves at how this turned out.
Sometimes there is a “problem asset” – a piece of property or art that has emotional baggage, along with poor planning for disposal, such as an unclear title or problems with a deed. The emotions are high following the death of the guiding force of a parent. Feelings can get hurt, which can create a hotbed of controversy and fighting among the children. This squabbling, of course, isn’t what their mother intended.
The old adage, “good fences make good neighbors” leads to more successful outcomes. In the best situations, members of the different generations have regular, thoughtful communication in which their important values are discussed. Estate planning has been completed and is regularly reviewed. Sometimes, hiring a trust company to be named executor or trustee of the estate can help keep the peace. When given to a family member, the executor or trustee role can often be a thankless job that comes with liability and creates unnecessary turmoil in the family.
Some of our clients have family properties that are important to pass down to the next generations. When members of the third generation are adults with their own financial lives and liabilities, it is inevitable that more people will be involved.
Forming an LLC that governs the property makes the transitions smoother for the generations to come. This governance would provide for ways for members of the third generation to handle the dear property with a set of rules that can keep the harmony. If these rules come from the sage stance of the matriarch, they can be quite a gift to that third generation.
Inheriting a fortune often comes with a burden. It can be helpful for the next generation to receive guidance from the parents. Sometimes they need outright permission to spend the money. This might be hard for parents who believe that talking about money is a taboo subject. I agree with them, but I also believe that communicating about the family intentions and money is a fantastic way to educate and prolong the wealth. In addition, and very insightful, I’ve observed that these clients tend not to be egotistical about their wealth. For example, they don’t pressure their children to keep the family compound. They favor family harmony over an asset.
On top of the family dynamics, one must address current financial planning. Recently, Congress passed the SECURE ACT, which will change how the non-spouse (i.e. adult children) will inherit IRAs. If the matriarch is the surviving spouse, there could be some planning to embrace with her estate plan. Clients who have estate plans that include leaving retirement accounts to heirs should consider reviewing those plans with a financial planner.
Or, you, the queen, could change your mind and give your money to your corgi instead. As Jerry Seinfeld put it, "Dogs have no money. Isn't that amazing? They're broke their entire lives. But they get through. You know why dogs have no money? No pockets."
She’s elegant. She’s wise. She’s Queen Elizabeth mixed with a hint of Princess Margaret’s fun. She has everything she ever wanted and is past the point of wanting more. She wants to leave her substantial wealth to her adult children. They get along now, but she wants to ensure that after she is gone that the kids will not fight over the red tricycle.