The baby boomer generation is aging. Over the next decade or two there will be an enormous transfer of wealth to the next generation. This should be a good thing. The intention is good—to provide for the next generation—but actual results are often disappointing. Everyone is familiar with the statistics on lottery winners. Many lottery winners will have lost most or all of their winnings within just a few years. It is the same with inheritances. A large percentage of inheritances is quickly squandered and lost. This is tragic. Not only is the work, thrift and discipline of the previous generation discarded, but the education, retirement and dreams of their children are lost or impaired.
So what can be done to prevent the next generation from acting rashly and spending inherited funds unwisely? Unfortunately, there is nothing that can guarantee that the next generation will act responsibly. But there are some things that will certainly help. Here are a few that we have found to be helpful:
- All family members need to develop the discipline of saving and know the basics of investing. This is a process that ideally starts when children are small but can commence at any time.
- Family meetings. As parents age, holding a family meeting or series of meetings where goals and expectations are frankly discussed along with strategies to accomplish them.
- Introduction to resources. All family members should personally know the Financial Advisors, Accountants and Attorneys who assist with the family financial affairs. Relationships are important. These are the professionals that will be assisting the survivors after a death in the family. They can best help if they know the individual family members and their strengths and weaknesses well.
- Estate planning. A Revocable Living Trust can offer a measure of security to family members. Distribution to children can be delayed until they reach a suitable age. Then distributions can be made over a period of years instead of in one lump sum. Where a disability exists, distribution can be eliminated altogether with the Successor Trustee instead being authorized to provide for a disabled child or elderly dependent. Specific instructions to fit each child or beneficiary can be given to a Successor Trustee. Of course, the success of this estate plan depends upon the skills of the person chosen as Successor Trustee. If no family member has the needed skills, an independent fiduciary can be nominated. An independent fiduciary may also be a good choice to serve as co-trustee with a spouse who may be disabled, elderly or unable to handle business matters. Where it is necessary to name a person of limited business and investment experience as a Successor Trustee, it is sometimes helpful to limit the discretion of this Successor Trustee to normal day to day business matters and instruct that he or she is to take no action involving monies in excess of a set amount without the concurrence of the family financial advisor, CPA or Attorney. A Revocable Living Trust is a very flexible document that facilitates the protection of family members and minimizes the damage that might otherwise be done by unwise decision making. And so long as beneficiaries’ money remains in the Trust, it is protected from creditors of the beneficiaries.
The lawyers at Platt and Westby, P.C. have been practicing in the area of Probate and Trust law for over 30 years. Contact any of our Phoenix Probate and Trust lawyers at 602-277-4441 or use the e-mail contact utility on our website at www.plattwestby.com to schedule a no-fee initial conference concerning any Arizona or Phoenix Probate or Trust matter. We will answer your questions and, where appropriate, suggest potential solutions.
Platt and Westby, P.C. has offices in Phoenix, Arrowhead, Avondale, Scottsdale and Gilbert, Arizona.