Preparing Children for Future Inheritance

Parents need to prepare their children to oversee and sustain their inheritance.
Parents need to prepare their children to oversee and sustain their inheritance.

Transferring wealth and having it last more than two generations is very difficult, says an article that offers suggestions: “4 Ways to Prepare Children Now to Oversee their Inheritance Later” from Forbes. A decades-long study of 2,500 families found that 70% of family fortunes disappear by just the second generation. By the third generation, that number leaps to 90%.

Why is wealth retention so difficult? One of the key reasons is a lack of preparation. Parents may devote time and resources to ensure that their estate is organized, but they must also prepare their children to oversee and sustain inherited wealth and give them the skills, values and knowledge needed.

How can parents make sure their family wealth endures? Here are a few steps:

Have an estate plan created. This lets you maximize the inheritance left to heirs, by minimizing taxes and asset distribution costs. When the children are minors, name guardians to take care of them and trustees to financially manage their inheritance until you feel they are old enough to do so, themselves.

Give your children a financial education. Children need to be taught how to save, what compound interest can do, how investments work and how money is earned. Let them handle money early and experience the consequences of poor decision making. Better to learn at a young age with small amounts of money, than when they are adults and the stakes are higher.

Let them know what the family’s net worth is and apprise them of any changes. These discussions should be age-appropriate, but financial openness and honesty that starts young eliminates confusion and mixed messages. Give them a small stake in the planning, by allowing them to choose a charity and make a donation to it. Delegating even a small portion of control and letting the child see how it feels to be a steward of wealth is an important lesson.

Encourage children to build their own wealth. Many wealthy parents worry that knowing there is an inheritance in their future will prevent their children from having any ambitions. Grant a limited amount of control over portions of their inheritance at certain ages and teach them about options: investing, saving, donating or spending.

A financial education that starts early and provides time for lessons to be learned will make children at any economic level better prepared for good decision making throughout their lives.

For more information on other issues related to estate planning and your children see https://galligan-law.com/estate-planning-life-stages/planning-for-minor-children/

Reference: Forbes (July 1, 2020) “4 Ways to Prepare Children Now to Oversee their Inheritance Later”

 

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Estate Planning Issues Affecting the Sandwich Generation

If you're a member of the Sandwich Generation, make sure your parents and adult children have the necessary estate planning documents in place.
If you’re a member of the Sandwich Generation, make sure your parents and adult children have the necessary estate planning documents in place.

July is National Sandwich Generation Month, a time to honor those who are caring for both their children and their aging parents. This is a particularly stressful time for members of the Sandwich Generation who may not only be parenting their children but also spending the last few months homeschooling them. Older children who have lost their jobs or were unable to return to college after spring break due to the coronavirus may now be living at home. At the same time, members of the Sandwich Generation may be acting as caregivers for parents who are no longer able to look after themselves, or who are at a higher risk for contracting COVID-19.

Some of the stress of caregiving can be alleviated by making sure your aging parents and adult children have legally valid and up-to-date estate planning documents in place, and if they do not, encouraging them to have these important documents prepared. This is a relatively simple step to ensure that there will be no delays or uncertainty if you have to take action in an emergency to make medical and financial decisions for them. If they have the necessary estate planning documents in place, you will have the peace of mind in knowing that you will be able to avoid delays when you need to act quickly to preserve their safety and well-being.

What estate planning documents should you have for any person in your care?

  • A financial power of attorney – This will allow you to pay bills, manage financial accounts, file tax returns, talk to insurance companies, deal with issues related to benefits, hire a caregiver, and sell property on behalf of your parents. A financial power of attorney is also helpful in the event you need to handle financial matters on behalf of your adult child (over the age of eighteen), for example, cashing a paycheck for your child or signing a new lease on your child’s behalf.
  • A medical power of attorney – A medical power of attorney enables you to make health care decisions for your parents, if they are unable to do so themselves.  A medical power of attorney is also important for your children who are 18 or older. Once your child reaches age 18, you no longer have the authority to make medical decisions for your child.
  • A HIPAA Authorization – The Health Information Portability and Accountability Act (HIPAA) requires medical records to be kept private unless an individual consents in writing to sharing of protected health information with a named individual. If you are your parents’ caregiver, they should fill out a HIPAA authorization permitting your parents’ health care providers to keep you informed about their medical conditions and treatments. You should also keep in mind that you are not authorized to receive any medical information regarding a child of yours who is 18 or older. If your adult child wishes you to be involved in his or her health care you need a HIPAA authorization signed by the child allowing you to receive his or her medical information.

It is crucial for your parents to put these estate planning documents in place before they develop any cognitive loss that would prevent them from having the capacity to sign a legal document. If they develop dementia, for example, and are not able to understand the objective or content of a power of attorney or other document, they will be legally unable to execute the document. In that case, you will have to go to a court and ask to be appointed your parents’ guardian to manage their health care and financial affairs.

It is also important that these documents be put in place by your adult child, regardless of any health conditions, because once your child is a legal adult, you can no longer automatically act on your child’s behalf. The worst case scenario is that your adult child is unconcious or in an accident and you are unable to quickly get information from your child’s health care providers.

Members of the Sandwich Generation do not always remember to take steps to lighten their load. But one important step that can make things easier for you as a caregiver is to make sure that your parents and adult children have the necessary estate planning documents in place so that you can quickly make decisions on their behalf if you are called upon to do so.

For more information see https://galligan-law.com/everyone-needs-an-estate-plan/

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Estate Planning for Our Pets

A complete estate plan should address what happens to your pets when you are unable to care for them.
A complete estate plan should address what happens to your pets when you are unable to care for them.

Many people laugh when they hear about estate planning for pets. They think of outrageous stories of a dog or cat being left millions in a trust. But have you ever considered what would happen to your pets if you were not around to take care of them?

It’s easy to assume that someone will step in to care for your pets after you pass away, but the reality is, unless you have made arrangements ahead of time, your pet could be released onto the streets, dropped off at the shelter, neglected, or euthanized. In the best of circumstances, your pets might not get the special care they need if you have not left behind instructions regarding their special food, medications, and other details that would help someone care for your pet the way you would have.

The simplest way to make sure your pet will be cared for after you’re gone is to talk to one or two people to get their commitment to either take your pet into their home or find a good home for your pet. You can then include a short paragraph in your Will or living trust stating who should get custody of your pet. You can even leave the person who agrees to take your pet a small sum of money as a token of your appreciation.

If you are unable to find a person to agree to take your pet, there are organizations dedicated to the care of pets in exchange for a monetary gift to the institution. These organizations usually require that you make arrangements for the pet’s care during your lifetime. Your estate planning attorney should be able to give you more information regarding the organizations that offer these services.

Pet trusts are becoming more and more popular as a vehicle for providing the funds to care for pets after an owner’s death. If you want to leave money for the care of your pets after you are gone, a pet trust will make sure that the funds are spent on your pet and not used for other purposes.

You also need to consider what happens if you are alive, but unable to care for your pet due to a disability or incapacity. That’s why you should include provisions in your power of attorney allowing your agent to make arrangements for the care of your pet when you’re unable to do so, yourself. Your power of attorney should also allow your agent to expend funds for the care of your pets.

In any event, you should compile a set of instructions for your pet’s caretaker to follow. If your pet needs to be fed a certain type of food at precise times of day, prefers a special toy, has a specific bedtime or needs to be walked three times a day in a specific park near your home, you can include all this information in the instructions.

Many of us consider our pets as are part of our families. As such they need to be included in our estate plan, along with everything else we treasure.

Reference: The Harvard Press (May 14, 2020) “COA speakers urge pet owners to plan for their animal’s future”

 

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