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Published 08-02-2018

What’s love got to do with it? Authored by Ken Stern

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My good friend Bob called me the other day to tell me about his legacy plans. I could tell from his tone that he was clearly communicating to me that this was his decision and that he was not in the mood to be challenged. I could tell, however, that he was acting emotionally not rationally and that I had to take issue given the circumstances. His daughter was getting married. They had waited a long time to plan the wedding. His gift was to buy the newlyweds a house.

“Congratulations Bob, that’s wonderful news. Let me help you,” I said. “Forgetting the gift tax, in what name should the house be purchased?”

Bob stammered out, “in both their names…right?”

“Let’s play it out,” I replied. “If something was to happen to your daughter, do you want the house to go to your son-in-law or your grandchildren?”

Bob proclaimed he wanted it to go to his grand-kids.

“Well that makes sense”, I said to Bob. “Actually, if you died and your daughter inherits your assets wouldn’t you want to make sure your daughter keeps these assets separate? Let’s do the right thing for your daughter and her new husband, but let’s also think this through. Love and Money is best when kept separate. Don’t you agree?”

Adopting a new conciliatory tone, Bob thankfully agreed.

Love & Money

These are two of the MOST emotionally charged words that invoke the full spectrum of reactions. The Stern Word on this subject can be summed up quite simply: Similar to separation of Church and State, Love and Money should also be separate. When it comes to our legacy, thinking about family and what may happen when you die, here are a few of the common pitfalls that any of us could walk into:
  • You die. Your spouse inherits the estate. Surviving spouse gets remarried and later dies. Kids could possibly be disinherited (this could be either intentional or unintentional). Either way you’re dead and can do very little about the circumstance.
  • Your child inherits your money. They are currently having a creditor issue or possibly they took this inheritance and commingled the money with their spouse and later divorce. Either way the possibility exists of losing the inheritance.
  • Son or daughter blow their inheritance. It was fun while it lasted. However, they are now getting older and finding it harder to replace their income stream.
Let’s get this straight. We love our families. We love our spouses and kids. We even may love our kids spouses. Our legacy should not be the equivalent of holding a winning lottery ticket. Our legacy is the continuation not the culmination of our values, ethics, and financial pursuits. We pass this future generations with the highest regard and responsibility. Here are a few ideas to ensure it goes “right”.

Map it out.

Map out every and all goals you have as well as issues that you feel may be a concern, including, but not limited to:

What do you want to have happen if you are incapacitated – how do you want to be cared for, who do you want to determine you are incapacitated, and who should be in charge?

Estimate potential taxes and other liabilities to the estate.

How complex are the investments and businesses that will need to be managed and governed in the event of your incapacity or death?

When considering who you appoint to be in charge, are you considering the ramifications? Meaning, if your oldest daughter is trustee, will your youngest son resent being governed by his sister?

If you die and your spouse remarries how flexible should the estate be?

Perform beneficiary audit.

Spouses and kids should not always be the beneficiaries of assets including tax-deferred accounts such as IRA’s. Ask legal and tax council about naming various entities as beneficiaries.

Consider not naming two people be in charge as your successor.

Spouses and kids should not always be the beneficiaries of assets including tax-deferred accounts such as IRA’s. Ask legal and tax council about naming various entities as beneficiaries.

Rethink how beneficiaries receive assets.

Do they really need a lump sum when you die? A lump sum subject to their marital issues, taxes and other possible bumps along the way? Allow assets to stay in the trust with triggering events for taking money out, if necessary.

We love our families. The more you love the greater the responsibility it is to properly structure your legacy. Separate your love from the financial concerns of your estate and never mix love and money.

Now that’s the Stern Word.

Ken Stern
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