In Perspectives, Wealth Planning

We all know and love someone that struggles, be it with mental health, addiction, learning disabilities or other special needs and challenges. While these issues hit close to home for nearly every family, there is often a hesitancy to discuss them openly and honestly.

Planning for loved ones who face challenges in their everyday lives is critical, but families are often reluctant to face these issues head-on when they meet with their advisors to discuss estate and financial planning. Anxiety affects open communication surrounding these issues as clients wonder how it will affect them, their children, their families and their legacy.

The hesitation to communicate openly is often meant to protect loved ones, but failure to discuss these matters when structuring your estate and financial plan can have dire consequences for those loved ones you are trying to protect. To carefully craft an estate and financial plan, it is imperative for families to share pertinent details about their lives and loved ones with their team of advisors, even if that means sharing their perceived “skeletons in the closet.”

Communication is Key

Talking about your money and your family requires a great deal of trust. This trust relies on a family’s ability to view their advisor not just as a subject matter expert but perhaps more importantly as a human being. An advisor who is willing to share their own experiences — whether firsthand or through helping other families — is better able to convey their knowledge of the myriad ways mental health, addiction, special needs and other issues can affect families. Providing a human element helps calm nerves and encourages open communication.

Just as transparency with your advisors is important, so too is communication with your beneficiaries, to the extent advisable and appropriate. Allowing your beneficiaries to take part in family discussions empowers them to feel they are part of the process and not simply being controlled by parents or other loved ones. These beneficiaries may need to be protected from themselves and others, but they also need to be confident that their advisors and fiduciaries will support them and have their best interests in mind.

Through open and transparent communication, the advisor can gain a better understanding of the family dynamics and needs. Sharing pertinent details like the beneficiary’s living situation, whether he or she receives state or federal benefits and programs the person attends, will allow the advisor to create a plan that will support and protect the beneficiary while aligning with the grantor’s intentions.

Fiduciary Selection

When choosing a fiduciary – such as a trustee, personal representative or conservator – people often appoint a sibling, an adult child or a family friend. This may seem like a good idea as it is cost-effective and more personal.

However, when we need to administer assets for a loved one with special circumstances, it can get complicated. Placing a loved one in this position may lead to difficulty gaining enough emotional distance to help the beneficiary obtain the most prompt and proper treatment, and it could potentially encourage resentment by the loved one serving as a fiduciary, the beneficiary or both.

Typically, parents do not want to place an undue burden on other children when they, as parents, are no longer available to mediate. Using a corporate fiduciary or an objective third party removes the emotional and family dynamic and alleviates the burden of placing a loved one in trying circumstances.

Another possibility that many families in similar situations embrace is a hybrid approach where a family member and a corporate trustee act as co-fiduciaries. This works well when there is a sibling who really understands and can communicate easily with the beneficiary. The hybrid approach leverages this relationship while removing the considerable time commitment and pressure of making decisions that could adversely affect the relationship. This approach allows the corporate trustee to do the heavy lifting while also having a family member on board to represent the family.

The Importance of Education

Educating your children and other beneficiaries about special planning circumstances and why you made the planning choices you did will ease the administrative burden.

While families may believe they are protecting their loved ones, not giving your team of advisors the information they need to thoughtfully plan for the beneficiary, regardless of what they may be struggling with, can result in inadequate planning and unintended harmful consequences. The sooner families open up and start talking, the less stigmatized the beneficiaries — and the entire family — can be. Even if a beneficiary challenges certain aspects of his or her care, open communication will lead to a faster resolution.

At Crestwood, we can help facilitate these conversations and shepherd families throughout the entire process to ensure the generational wealth transfer goals are met while supporting the holistic needs of the family.

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