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Estate Planning for Sandwiched Boomers

Clients' parents and children should be part of the process, too.

Helen Modly, 09/09/2010

The baby boomers have been saddled with many monikers, and one of them is the "sandwich generation." This describes the challenge of caring for elderly parents at the same time that teenage and young adult children demand time and resources. Don't focus your services just on the ham and cheese in the middle of the sandwich--the slices of bread on both sides are important, too.

When you throw out the idea of multigenerational planning, what comes to mind for most advisors involves estate-planning techniques, such as stretch IRAs or dynasty trusts. We see multigenerational planning as an opportunity to engage our clients in discussions about how they perceive their roles in helping their parents through their waning years, and what values and lessons they want to pass on to their children. These issues are relevant to all clients, not just those in the super-wealthy category.

Helping With Mom and Dad
We have had several clients come to us to help them deal with financial issues raised by their parents. As Mom and Dad get older, they turn to their children to assist them with tasks they can no longer manage. Often, our clients come in with investment questions raised by the parents, and we have saved more than one 85-year-old from purchasing inappropriate investment products. Once we establish a relationship with the parents, they are happy to turn over the responsibility to us to manage their accounts, especially knowing that we work with their children.

We have a policy in our office that allows us to aggregate family accounts to make sure our minimums are met. When a parent has an investment portfolio that normally would be less than our minimum, we are willing to take over management of it based on the fact that we have the other family accounts.

Frequently, Mom and Dad are having more than just financial problems, and our clients are faced with housing and medical decisions relating to their parents' declining health. We are currently creating relationships with elder care specialists--attorneys, geriatric care managers, daily money managers, senior move managers--so that we can support our clients when these issues arise.

Family Estate Planning
Once the parents become clients, we discuss their estate plans with them, without their children present. We have found that members of the World War II generation are often reluctant to reveal all of their financial assets to their children, but we encourage them to do so, using us as facilitators for the discussion. We can then help them craft an estate plan that is clearly understood by both generations.

If the baby boomer clients have been very successful in their careers, it is possible that they are facing estate-tax problems of their own. Knowing that, we can suggest that their parents consider leaving some or all of their assets to the grandchildren, either outright or in a generation-skipping transfer trust. Depending on the various family members involved and the size and complexity of the estate, we can recommend ways that they can direct their assets to meet everyone's needs.

One of the advantages of preparing the estate plan for the parents is that it often gives us the opportunity to meet their other boomer-age children. What better way to be introduced to potential clients than through trusted family members?

What About the Kids?
Since our primary source of revenue is from managing investments, why waste time on the young people who have no money? Frankly, we see this as a real value-added service for our clients, most of whom are totally devoted to their children. And, let's face it--they will also eventually be the inheritors, so you can think of this as ultralong-range business development for your firm.

We currently work with several of our clients' children who have investment assets in their own names which they acquired through inheritance or gift. We try to meet with them before they reach the age when they acquire control of the assets (sometimes as young as age 18), so that they understand the responsibility that goes along with the money. We educate them as to the investment process as well as introducing them to the family legacy that the investments represent.

We have also had opportunities to speak to high school and college students about money matters, and we have been astonished at the types of questions they ask. They are very interesting in learning about credit cards, investing, banking procedures and other concepts, but they clearly have had no prior exposure to these ideas. It appears that most parents are neglectful about teaching their children about basic money concepts perhaps because they don't feel qualified to do so, and basic financial education in the schools is sorely lacking. Therefore, young people are leaving home and entering the work force without enough knowledge to keep themselves out of financial trouble.

We will be offering the college-age and young adult children of our clients the opportunity to spend an hour with one of our younger planners to discuss financial issues. We will have a scripted conversation, which can be done over the phone, tailored to the stage in life of the child (in college, just entering the work force, newly married, or starting a family). We will provide our clients a "gift certificate" for a free hour consultation that they can pass on to their children. We are also considering offering this service to non-clients for a small fee.

Ideas to Start the Conversation
We have recognized that many boomer women simply have no interest in learning about their investments, even though this often proves detrimental. We are going to attempt to slip them some education by inviting them to a mother-daughter event. The pretense is that they will be bringing their daughters to a luncheon or dinner so they can learn about basic financial concepts including investing. After a brief introduction to the various financial life stages during lunch, the group will split into different rooms for a discussion of topics applicable to each stage. Hopefully, this will be a truly multigenerational event, as we will be encouraging the boomer invitees to bring their mothers along as well.

In order to build a financial services business that can be sustained over a long period of time, it is essential to build strong relationship with your clients' families. As you add younger planners to your staff, this gives them an opportunity to begin to create connections with others their own age. This increases the likelihood that you will retain the family's assets when the older generation dies, but, more importantly, it cements your relationship with your valued clients.

This article was cowritten by Sandra Atkins, CPA/PFS, a wealth advisor with Focus Wealth Management.

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