Incorporating Family Well-Being In Your Plan

Issues such as passing down your values and understanding your parents’ end-of-life wishes are often the more difficult parts of a plan to tackle – but also the most rewarding.   

The well-being of family members is likely your top priority. You care deeply about their future and likely spend much time and thought preparing for it. And like many of the executives we advise, you will probably plan financially for major milestones – children’s education, weddings, first homes and possibly your grandchildren’s education.  

But what are you missing? What other steps can you take to ensure you comprehensively plan for those you care about?

In our experience, there are several aspects of wealth planning that tend to worry clients the most – in part, because they are more difficult to tackle. Below we cover four of the most common and provide suggestions on how to successfully address them.

Passing Down Values With Wealth

In addition to planning financially for major milestones, you may also make substantial gifts transferring wealth to your children during their lifetime. Having addressed their financial security, the question of how to transmit the values you hold becomes more pressing. And it can be much more challenging than saving for a financial goal. The following can help:

Talk to your family about wealth

Many families spend little or no time talking about wealth. This contrasts sharply with the amount of time they spend managing its technical and tax issues. Further, as an executive, much of your financial wealth may be public. If so, your older children can find your compensation online, and so can their friends. This makes talking candidly to your children about wealth – and how it fits into a rewarding and meaningful life – all the more important.

For a guide on how and when to have productive conversations that communicate your values, read Wealth and Wisdom Across Generations.

Make financial decisions together

Include your children in decisions about finances to demonstrate the concept of financial trade-offs as well as the role that values can play in planning. For example, if annual gifts have accumulated in a brokerage account for a child, have the child engage with you or your advisor in the review and investment of the account. Do this based on the child’s goals. Are they unsure of their goals, or are you not sure that you agree with them? This exercise provides you the opportunity to have more meaningful conversations around wealth’s purpose.

Engage in philanthropy together

If philanthropy is important to you, think about ways to include your children. What needs or causes do they care about? How will you support some of those causes? Or do your children have the ability to give themselves? Research shows that giving is highly influenced by parents and grandparents¹, and in our experience, some of the most rewarding and successful philanthropic endeavors are those shared by families across generations.

Consider Including a Statement of Wealth Transfer Intent (SOWTI) in Your Estate Planning Documents

As a personalized declaration of your wealth transfer goals, a SOWTI is the heart of your trust or will. It provides a unique intention that is tied to your personal history, values or perspectives. It is a more formal method – with potential legal benefits – of transmitting your values with your wealth.

Empowering Your Children to Manage Money Responsibly

In addition to talking candidly to your family about wealth, focused financial education can help family members develop the skills and understanding needed to manage money responsibly. Financial education can take on many forms and can be introduced as early as five years of age. To help with this ongoing process:

• Talk to your advisors about where to find age-appropriate resources.
• Learn more about Northern Trust’s Essentials financial literacy curriculum designed for young adults.

Planning for Your Parents and Other Family Members in Advance

Many of us have parents or other family members who we will want to support as they age. The financial costs and emotional decisions associated with this support, including long-term medical and personal care, are significant and should be addressed well in advance of when they are needed. To plan accordingly:

• Use your team of advisors to find advisors for parents and other family members, or have your parents engage your advisors separately.
• Determine what insurance options are available, and work with your advisors to model Social Security and Medicare income and expenses.
• Understand that direct payment of medical insurance and medical expenses is excluded from the gift tax and is not considered income to the recipient.
• Keep a record of payments. Determine whether you prefer to assume financial obligations alone or with other family members. Likewise, consider whether you desire to be reimbursed from the eventual estate or have the estate distributed among family without any reimbursement. These may be uncomfortable issues to address, but they are important and easier to navigate before the process of formal estate settlement.
• Address important end-of-life decisions before a health crisis arises. Again, these may be difficult discussions, but they are less grim when not done in the midst of a health incident.

Actively Managing and Protecting Your Family’s Financial Privacy

As an executive your life has the potential to be very public. If you are an executive of a public company, much of your financial wealth is also public thanks to required securities law filings. And with social media and persistent technology infiltrations, your personal matters and financial wealth are public, not by intention, but by default. This puts your family at high risk for financial fraud and other crimes. To help protect them:

• Be alert and intentional. When was the last time you Googled yourself? Your spouse? Or your children? Be aware of what information is publicly available about your family.
• Taking age and maturity into account, have conversations with family members about cybersecurity best practices, including on social media. Has your family expanded with the marriage of an adult child? Make sure to include new family members in these conversations.
• Engage your advisors to spend time with your family and educate them on the basics of information privacy and security. At Northern Trust, our Essentials curriculum covers this topic, with a focus on affluent families.

As an executive and dedicated family member, there simply is not enough time in your day. But in our experience, planning around the above issues that impact family well-being offers significant relief and peace-of-mind. And you don’t have to go it alone. The right financial advisors for you and your family will be equipped to help you with the more delicate points of wealth planning.