How to Plan a Successful Financial Future for Every Family
Many clients with concerns about a struggling adult child are apprehensive about discussing such a sensitive topic. But broaching this subject can lead to a number of benefits for all parties involved — for the family, for the adult child, and for you as their financial advisor.
Working with us rounds out the team of professionals needed to achieve the client’s goals and fully protect a client’s family, resolving these sensitive situations smoothly.
Step #1: Discuss the issue with your client
Adult children who are struggling with addiction, irresponsibility with money, or messy marital issues all fall into the “troubled adult children” category because these issues typically concern parents. Many parents are concerned about where their financial assets will end up if distributed to these troubled children. No one wants their legacy to be squandered on a harmful addiction, seized by a creditor, or absorbed by a contentious divorce.
If you sense that this is an issue with a family you advise, ask them, on a scale of one to ten, what level of anxiety they feel about distributions going directly to the child in question. This is an easy way to determine how much follow-up is needed. If the anxiety is high (anything over a seven), then loop us in as soon as possible. This first step can be daunting, as it often touches on an emotionally loaded topic for the family, but asking them about the anxiety level in these numerical terms, rather than the specifics of the situation, helps clients express their concern without having to discuss potentially uncomfortable details. As a result, you can begin to put their minds at ease, assuring them that there are ways to manage the situation with everyone’s best interests in mind.
Step #2: Explore trusts and policies together
One solution that can mitigate the negative impacts of unstable adult children on a family’s wealth is the use of the lifetime trust. Lifetime trusts hold and manage assets, while making distributions throughout a beneficiary’s life rather than a one-time distribution of assets. This minimizes the risk of irresponsible or unwise spending. Because the inheritance is never distributed into a joint account, these types of trusts can also keep the assets out of the hands of unhappy ex-spouses after a divorce. Plus, lifetime trusts can contain tax planning that minimizes income and estate taxation.
Keeping money within a trust not only solves your client’s concerns by adding extra protection to the management and distribution of a child’s inheritance, it also benefits you as their advisor by allowing you to retain more assets under management. It’s a win-win for all parties involved. Additionally, unmet life insurance needs, annuity needs, and other factors may need to be met in order for the plan to fully protect the client and his or her family.
Step #3: Work with a professional team
Working in concert as a professional team makes it easier to provide your clients with a sustainable and beneficial roadmap for dealing with the issue of troubled adult children. You can enjoy an enormous value-add when you partner with us to deliver a solution that puts the client’s mind at ease.
As a trusted financial advisor, you are perfectly positioned to empower clients to protect their family from bad decisions and bad people, and we can help. Call us today to discuss how we can transform this all-too common challenge into a fantastic outcome for all parties involved.
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.