Addressing an aging parent’s estate plans can be challenging for everyone. People have had it drilled into their minds that it’s impolite to discuss money, politics and religion. While avoiding the latter two may still be wise, it’s never a good idea to avoid discussing money and how to manage it with your progeny.
It’s important to share your vision with them of generational wealth. It’s a sad statistic that here in America, by the second generation, 70 % of the wealth generated by the first generation will be dissipated, and by the third generation, 90% of their wealth is gone.
How can that happen so frequently?
There are a few factors that contribute to this phenomenon and include:
- Heirs who are clueless about money. Regardless of their other abilities, many second and third generations were never taught (or bothered to learn) how to manage great wealth. Instead, they let it recklessly slip through their fingers.
- Those taught not to talk about money. It can appear rude or improper to discuss the family’s finances with children and adults, but it’s unwise to avoid it. Start early with allowances connected to behavior or actions and have the kids set aside a portion for a savings account.
- First-generation wealth-gatherers worry about heirs overspending. Dissipating a lifetime’s accrual of resources and cash is pretty easy to do. Buying a few McMansions, some expensive cars and costly “grown-up” toys can bring a bank balance down fast.
But take heart. There still are ways to protect your wealth further into the future than you can see. Trusts are one financial vehicle designed to structure an estate plan. They can even be set up to protect heirs from their own worst intentions.
Learning more about their estate planning options can help elderly parents feel confident about the future.
