As clients progress through retirement, most often they have accomplished their goals and are living the lives that they had hoped for. Over time, attention turns from the achievement of those goals and that lifestyle to ensuring that a legacy is passed on in the way they intend. While there may be charitable or other intentions, most often clients are interested in passing down wealth to their kids or other family members.
If not planned, this can be a messy situation. Unfortunately, we have seen many times over the years where this transition does not go smoothly. This could be simply because wills are nonexistent or outdated, or beneficiary arrangements and powers of attorney are not established. But even if those things are completed, intergenerational planning can be foiled by a lack of clarity and communication regarding intentions.
According to the Money and Family study by Ameriprise Financial, 67% of investors studied said that passing generational wealth to their heirs was important to them. (1) In the same study, however, only 19% of investors have been transparent with their families regarding finances and estate planning. There is a clear disconnect between what investors say they want to do and what they are doing.
This is one area where we can come in and help families.
For clients that are open to it, we can coordinate a family meeting with all parties. This can be done in person, but many times it does involve virtual meeting capabilities for family members that are scattered across the country. Here are things that can happen during that meeting, that both generations can find helpful:
- Establishing a “Trusted Contact”, someone that can be contacted in the event that for whatever reason our client cannot be contacted. This person can’t have account access or perform transactions but can help us reach our client.
- A discussion of the basic estate plan including whether Powers of Attorney (POA) have been set up for Ameriprise accounts. The POA does have transaction capability, and this is useful if the client is not reachable or has become incapacitated.
- A discussion of the clients’ Long-Term Care plan if they have one. This is often a concern for the next generation.
- A review of beneficiary arrangements.
- A discussion of underlying investments that a client holds, with rationale and purpose.
- A review of what the process will be should one spouse die, how the survivor would process the claim, changes in ownership, timeline, etc.
- A review of the process when the surviving client dies. This includes walking through what steps each beneficiary will need to make their claim, how ownerships of accounts will change, total financial impact and potential tax consequences, particularly for inheriting IRA accounts.
- Sometimes this leads to a discussion of current gifting strategies that could be advantageous to all parties.
It’s not for everyone and that’s OK, but for those that go through this process it has several benefits for everyone. Our clients can get more peace of mind regarding their situation and that they have been clear with their intentions. They may also get POAs and beneficiaries setup if they somehow have not been. The next generation can get clarity and more peace of mind also, that their parents are being taken care of. But also, they get a picture of how this will ultimately impact them, which in turn can have an impact on their current planning for themselves. We take on beneficiaries as clients, even if they would not meet normal investment minimums. Being open can lead to other discussions. For example, the next generation may be struggling with saving for their own retirement vs. living today, or what they feel they can spend on their own children’s education. Maybe it makes sense to initiate gifting today vs. waiting until the beneficiary no longer needs it. Or, even if there's no current gifting, the beneficiary could choose to make different tradeoffs knowing what they are likely to inherit in the future.
If you are a client who would like to set up a family meeting, please let us know. And of course, if you are not a client and this sort of relationship is of interest to you (for you or your parents or children), we’d be happy to discuss your options.
Together, we can work to keep you on-track towards your financial goals.
Request a consultation with us to learn more.
Read more articles by Lance R Hoenig