Dec 14, 2013

Are you the family bank?

Americans lead increasingly complicated family and financial lives that make for challenging estate planning and retirement planning. An interesting new survey by Merrill Lynch and Age Wave puts some hard numbers on these trends we see in our Florida estate planning practice. The 2013 study, "Family and Retirement: The Elephant in the Room," polled 5,400 Americans of various ages about issues related to retirement. Here are some key findings. Do you recognize yourself and your family?

Are you the family bank? 

The study found that in most families, there is one individual who relatives view as the "family bank." (That is usually our client!) A majority of those age 50+ have given money to family members on a one-time or continuing basis. 

No surprise: The study found that the family bank is usually the parents. More than two thirds of parents age 50+ who were polled reported providing some form of financial support to adult children during the past five years, and one in five parents has an adult "boomerang" child living at home. Parents said the money they gave children went to pay mortgage or rent (20%), phone bills (18%), car payment (17%), health care (15%), and student loan repayment (11%). However, the majority of parents were not sure precisely how their gifts were spent by their children.

While generosity is a great thing, clients should be careful about giving away too much. Who will take care of YOU if your retirement funds run short?

Do you have stepchildren or step-grandchildren? 

If you are in a blended family, welcome to a growing club... and you had better attend to your estate planning. Divorce rates have resulted in a high incidence of blended families: Two in five of those polled said their family includes stepchildren. One third admitted that having stepchildren complicates their estate planning. This comports with our observations, as clients frequently express concern about making sure their assets pass to their own children and grandchildren, not in-laws. (There are several strategies to achieve that goal, including the increasingly popular Heritage Trust.)

Do you fear you will become a burden on your children? 

There is widespread fear about outliving one's money, getting sick and becoming a burden on one's children. The study found older people worry most about getting Alzheimer's. Surprisingly, only 37% of respondents thought they would eventually need some form of costly long-term care! In reality, 70% are likely to need these services for a period of time.

Nearly 90% of those polled said they would prefer to remain in their own homes if they could no longer care for themselves and needed long-term care. The biggest concern: relying on a family member for actual physical care. Living with a family member is considered just as undesirable as living in a nursing home. Despite these concerns, 67% of those polled admitted they have made no plans to avoid having to live with a family member if they are no longer capable of living independently. Thus, long-term care planning, from investigating long-term care insurance to Medicaid planning, should be included in every person's estate planning goals.

Are you avoiding "the conversation?"  

In our law practice, we encourage clients to provide their families or other trusted individuals with basic information about their estate plans and health care preferences. However, the study showed that most people have not had this conversation. More than 56% of parents over age 50 said they have not discussed estate planning or financial issues with their kids, be it wills, inheritances, or advance directives. They cited three main reasons for this: avoiding family conflict, avoiding plain old discomfort, and the belief that in the end, such discussions won't change anything.

Read the entire survey here.

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