9: Emotional Aspects of Intergenerational Wealth Flashcards
(85 cards)
1
Q
Definition of Intergenerational Wealth Transmission
A
The process through which, consciously or unconsciously, tangible and intangible assets are distributed from one generation to another. It’s more than an event; it’s a process involving preparation, the event itself, and the aftermath.
2
Q
Definition of Interpersonal Aspects of Wealth Transmission
A
The impact that relationships and communication styles have on the distribution of assets from one generation to another. Understanding family interpersonal dynamics is important for CFT Level 1 when dealing with wealth transmission.
3
Q
Definition of Multigenerational Transmission Process
A
Communication patterns and emotional styles passed from one generation to the next. This is often referred to as ‘family baggage’.
4
Q
Goal of the Presentation
A
To familiarize participants with some of the technical and emotional aspects of wealth transfers and to give them more comfort with identifying those concerns, not to make them experts in transferring wealth, navigating family dynamics, or resolving deep emotional issues.
5
Q
Key Players in Intergenerational Wealth Transmission
A
- Estate Attorney: Drafts legal documents like wills, trusts, and powers of attorney.
- Traditional Financial Planner: Financial generalist holding the ‘big picture’ of the estate plan. Often technically oriented and may not be familiar with financial therapy.
- Insurance Salesperson: Usually involved with more affluent clients and complex estate plans.
- Family Psychotherapist: Licensed mental health professional with no expertise in finance.
- Investment Advisor: Focus is typically limited to investments held by the client. Often compensated by commissions.
- Trust Company: Engaged to accept the oversight duties of trusts created in the plan.
6
Q
Common Emotions in the Wealth Transfer Process
A
- Anger
- Anxiety
- Grieving
- Gratitude
- Relief
- Annoyance
7
Q
Reasons Why Passing Money Beneficially is Difficult
A
Many have the money script, ‘I must leave something to the kids’. Research shows that 70% spend it all within their lifetime, and of the remaining 30%, 70% of the kids will also spend it all, leaving only 10% for the third generation. Poor investment decisions are not the main reason.
8
Q
Main Reasons for Inheritance Disappearance
A
Around 60% disappears because of a lack of trust and communication between family members. Another 25% evaporates due to a lack of preparation in handling the money. Only 15% disappears due to poor investment advice and high fees.
9
Q
How CFTs Can Help Maximize Life Savings
A
- Reframe the guilt of not leaving an inheritance and encourage spending.
- Explore giving wealth to worthy causes.
- Enable children to benefit from ingenuity, hard work, wise money management, and frugality.
10
Q
Examples of ‘Family Baggage’
A
- Legacies of family injustice
- Imposed mutuality
- Family secrets
- The closed system
- The ‘no talk rule’
11
Q
Common Excuses for the ‘No Talk Rule’ (Parents)
A
- ‘It’s none of their business’
- ‘If I share financial information, they will take advantage of me’
- ‘Talking about money will hurt our relationship’
12
Q
Addressing ‘It’s none of their business’ (Parents)
A
If a child is named as an executor, trustee, or agent in a Durable Power of Attorney, it becomes their business to know. Parents should consider sharing financial statements and advisor contact information.
13
Q
Addressing ‘If I share financial information, they will take advantage of me’ (Parents)
A
Consider if the children have a history of taking advantage. Preparing children for an inheritance is a loving act.
14
Q
Addressing ‘Talking about money will hurt our relationship’ (Parents)
A
Not talking about it may be more damaging. Parents may be fearful of being assertive.
15
Q
Common Excuses for the ‘No Talk Rule’ (Children)
A
- ‘It’s none of my business’
- ‘I don’t want them to think I am greedy’
- ‘It will ruin our relationship’
16
Q
Breaking the ‘No Talk Rule’ - CFT Role
A
- Address clients’ fears about talking about it.
- Help clients communicate their values about money.
- Assist clients in exploring if their behavioral communication of values is congruent.
- Help clients objectively assess each child’s money skills.
- Help children not assume they will inherit more than they will.
- Help clients prepare children for large or unexpected inheritances.
- Consider disclosing if the estate plan doesn’t treat children equally.
- Engage a CFT-II™ or CFT-III™ when client needs exceed your scope.
17
Q
Treating Heirs Fairly vs. Equally
A
‘Equal’ isn’t necessarily the same as ‘fair’. Consider inequalities during life (college funding, gifts, loans). These can sometimes be compensated for in estate planning. Document all loans to children and adjust gifts for inflation.
18
Q
Conversations with Clients Without Children
A
Address apathy and procrastination. Without a will, non-relatives may receive nothing. Explore who is considered family. Make charitable giving personal and meaningful. Encourage creative and out-of-the-box thinking. Encourage building relationships with emotional heirs. Explore donating collections while alive.
19
Q
Addressing Wealthy Clients
A
Don’t assume wealthy clients have everything together; estate planning disasters are common. Many don’t view themselves as wealthy or complicated. Address the money script that old financial advice is still good enough. Help them avoid the script that the most expensive advisors are the best. Encourage working with fiduciary advisors. Address the script that knowing how to make money equates to knowing how to manage it.
20
Q
Components of the End of Life Folder
A
- Copy of will, trusts, POAs
- List of personal effect distribution
- Letter to children/ethical will
- Details on accounts, credit cards, insurance, advisors
- Burial plot information/wishes
- Funeral plans/wishes
- Military service documents
21
Q
Dealing with Fear of Paying for Funeral
A
It’s a big concern for many seniors. Prepaid funeral policies are rarely smart. Instead, open an account with a bank or brokerage firm with a TOD feature to a trusted family member.
22
Q
Transferring Your Most Precious Asset - The Ethical Will
A
Passes on knowledge, beliefs, or values to heirs. It’s about passing on wisdom on how to live a life worth living.
23
Q
Components of An Ethical Will
A
- Prepare for difficult emotions
- Select the recipients (children, spouse, etc.)
- Be clear on the reason for writing it (pass on knowledge, values, stories)
- Express feelings for them, love, hopes
- It’s a work in progress.
24
Q
How a CFT-I™ Can Help Transfer Wealth Successfully
A
- Help parents prepare and teach children how to manage wealth.
- Help establish a process of examining lack of communication and family baggage.
- Help parents understand their own stories and shortcomings with money.
- Help engage the family in key discussions.
25
Your Job As a CFT-I™
* **Employ active listening** (mirror, reflect)
* **Be a supportive educator**
* **Help clients communicate their feelings and needs**
* Help anxious clients with assertiveness and communication
* **Help clients connect to other professional 'players'**.
26
Addressing the '**No Talk**' Rule Around Terminal Illness
Don’t expect accurate prognosis; go to NIH. Help interpret doctor's statements. Preparation for negative outcome doesn't reduce cure risk. Explore probability of cure. Work early on palliative care.
27
Top Financial Concerns of Terminally Ill
* **Having enough money to pay for care**
* **The financial effect on family finances**. Most financial advisors focus on advance directives, estate documents, and funeral plans instead.
28
As Illness Advances - CFT Considerations
* Ask family to keep you informed of changes (attention span, memory, word-finding, multitasking, fuzziness, depression)
* Meet early in the day, address important issues first, keep meetings short, put action steps in writing.
29
Recognizing the Emotional Time
Share your emotions, encourage clients to share, work in partnership to create plans for death and recovery.
30
What If One Spouse Is Reluctant To Plan?
Encourage not nagging. Research current wills and intestate laws. Give additional information on consequences. Explore reluctance (often emotional). The next best option is for the willing spouse to do what they can individually (will, trust, TOD, beneficiary). Encourage creating an inventory of assets and documents.
31
In The End, It’s Out Of Your Control
Your relationship with the client may last a lifetime or extend to heirs. It may also end with their passing. It can be discouraging to see heirs destroy the estate. Remember to care for yourself.
32
Define 'Intergenerational Wealth Transmission.'
The process through which, consciously or unconsciously, tangible and intangible assets are distributed from one generation to another. It's a process with preparation before, the event itself, and the aftermath.
33
What is the 'Interpersonal Aspect of Wealth Transmission'?
The impact that relationships and communication styles have on the distribution of assets from one generation to another.
34
Define 'Multigenerational Transmission Process.'
Communication patterns and emotional styles passed from one generation to the next, often referred to as 'family baggage.'
35
How is wealth transmission often misconceived?
Wealth transmission is often viewed as a single event that happens in an attorney's office after death, while it is actually a process with stages.
36
What is the goal of the CFT-I when addressing wealth transmission?
To familiarize them with the technical and emotional aspects of wealth transfers and give them more comfort identifying those concerns.
37
Who are the primary professional players in intergenerational wealth transmission?
* Estate Attorney
* Traditional Financial Planner
* Insurance Salesperson
* Family Psychotherapist
* Investment Advisor
* Trust Company
38
What distinguishes a traditional financial planner from a financial therapist?
A traditional financial planner focuses on the financial aspects of planning without addressing emotional/psychological components.
39
How do investment advisors differ from financial planners?
Investment advisors focus solely on investments held by clients, while financial planners take a more comprehensive approach.
40
What emotions commonly emerge during the wealth transfer process?
* Anger
* Anxiety
* Grieving
* Gratitude
* Relief
* Annoyance
41
How might anxiety affect wealth transfer planning?
Anxiety can result in clients not making their true intentions known, often due to fear of conflict.
42
How do emotions like grief manifest in wealth transfer planning?
Grief may be suppressed during estate planning or may be front and center, requiring financial therapists to welcome these emotions.
43
What does research show about how inherited wealth is typically handled?
70% of those who receive an inheritance of any size spend it in their lifetimes. By the end of the third generation, 90% of the original wealth is gone.
44
What is the primary reason large inheritances disappear, according to research?
About 60% of large inheritances disappear due to a lack of trust and communication between family members.
45
How can financial therapists help clients maximize the impact of their wealth?
* Reframe guilt about not leaving an inheritance
* Explore giving wealth to worthy causes
* Help clients understand the benefits of children earning their own money
* Be sensitive to aspects based on anger or punishment
* Consider donor-advised funds and other strategies
46
What are common examples of 'family baggage' that affect wealth transmission?
* Legacies of family injustice
* Imposed mutuality
* Family secrets
* Closed systems
* The 'no talk rule'
47
What are legacies of family injustice and how do they affect wealth transmission?
Legacies occur when family members resist agreements with those perceived as guilty of past wrongs, creating tension and poor communication.
48
What is 'imposed mutuality' and how does it affect wealth transmission?
Imposed mutuality occurs when family members are put together without choice, creating tension and questioning long-term ties.
49
How do family secrets impact wealth transmission?
Family secrets involve keeping negative information private, which can drive illogical family behaviors and prevent open discussions.
50
What is the 'no talk rule' and how does it affect wealth transfer?
The 'no talk rule' prevents open discussions about money, creating barriers to effective wealth transfer planning.
51
What common excuses do parents give for not discussing wealth transfer with children?
* 'It's none of their business'
* 'If I share financial information, they will take advantage of me'
* 'Talking about money will hurt our relationship'
52
How can financial therapists address the excuse 'It's none of their business'?
Point out that naming a child as executor or trustee makes it their business and suggest sharing important financial information.
53
How can financial therapists address the excuse 'If I share financial information, they will take advantage of me'?
Explore the child's history and emphasize that preparing a child for inheritance is a prudent and loving act.
54
How can financial therapists address the excuse 'Talking about money will hurt our relationship'?
Help clients understand that not talking about money may be more damaging than having open discussions.
55
What common excuses do children give for not discussing wealth transfer with parents?
* 'It's none of my business'
* 'I don't want them to think I am greedy'
* 'It will ruin our relationship'
56
How can financial therapists address the excuse 'It's none of my business' from children?
Explain that this could become their business quickly, especially if they are designated as executor or trustee.
57
How can financial therapists address the excuse 'I don't want them to think I am greedy' from children?
Coach the child to focus on responsibility rather than inheritance amount when approaching the topic.
58
How can financial therapists address the excuse 'It will ruin our relationship' from children?
Help clients understand that keeping secrets about money is often more harmful than discussing it openly.
59
What strategies can help break the 'no talk rule' around money?
* Addressing client fears about talking about money
* Helping clients communicate their values
* Assessing children's money skills
* Preparing children for large inheritances
* Engaging professionals when needed
60
What specific concerns should be addressed when helping clients prepare for wealth transfer conversations?
* Acknowledge their own fear
* Communicate values about money
* Assess congruence in behaviors
* Prepare children for inheritances
* Consider giving more during their lifetime
61
What is the difference between treating heirs 'fairly' versus 'equally' in wealth transfer?
'Equal' means the same amount, while 'fair' considers individual circumstances, past support, needs, and responsibilities.
62
What factors might justify unequal but fair treatment of children in estate planning?
* Previous financial support
* One child caring for aging parents
* Different needs
* Previous loans
* Different earning potential
63
How can a financial therapist help a client adjust for past inequalities in a fair estate plan?
* Subtract excess paid to one child from their portion
* Document all loans to avoid arguments
* Adjust gifts for inflation
* Consider compensation for care provided
64
What important caution should financial therapists offer about unequal treatment of heirs?
Therapists should advise parents to discuss unequal treatment provisions with each child privately and well in advance.
65
What special considerations exist for wealth transfer planning with clients who don't have children?
* Apathy and procrastination about estate planning
* Uncertainty about asset distribution
* Concern for non-relatives receiving nothing
* Questions about collections or heirlooms
66
What strategies can help clients without children plan their wealth transfer?
* Consider people regarded as family
* Make charitable giving personal
* Be creative with legacy giving
67
What should clients without children consider for wealth transfer?
Clients should consider:
* People they regard as family, even if not relatives
* Creative charitable giving that reflects their values
* Building relationships with 'emotional heirs'
* Donating collections to museums
* Giving personal possessions with stories attached
* Enjoying their assets now
68
Why is estate planning important for those without children?
Without a will, non-blood relatives inherit nothing, and possessions may be disposed of carelessly. Assets could go to distant relatives or the state.
69
What common misconceptions exist about wealthy clients and estate planning?
Common misconceptions include:
* Wealthy clients have their estate planning under control
* Wealthy people view themselves as wealthy
* Financial advice from earlier life is sufficient
* Higher fees indicate better advisors
* Knowing how to make money equates to managing it
70
What estate planning issues are particularly important for wealthy clients?
Wealthy clients face challenges such as:
* Estate tax planning
* Unprepared heirs for substantial inheritance
* Business succession planning
* Complex family dynamics
* Trust structures and charitable planning
71
What money scripts should financial therapists address with wealthy clients?
Key money scripts include:
* 'Financial advice from early is good enough now'
* 'Wealth transfer planning is for rich people'
* 'Expensive advisors are the best'
* 'Making money means knowing how to manage it'
72
What should be included in an 'End-of-Life Folder'?
An End-of-Life Folder should include:
* Copy of will, trusts, powers of attorney
* List of desired distribution of personal effects
* Letter to children/ethical will
* Details on accounts and insurance policies
* Information on burial wishes
* Funeral plans
73
What concerns do many clients have about funeral expenses?
Clients often worry about:
* Paying for funerals without burdening family
* Drawbacks of prepaid funeral policies
74
What alternatives should financial therapists suggest instead of prepaid funeral policies?
Clients should open an account with a bank or brokerage with a transfer-on-death (TOD) feature for funeral expenses.
75
What is an 'ethical will'?
An ethical will is a document that passes on wisdom, knowledge, beliefs, and life lessons, creating a legacy beyond financial assets.
76
What are the main components of an ethical will?
Main components include:
* Preparation for emotional nature
* Selection of recipients
* Clear statement of purpose
* Expression of feelings and values
* Family stories and vision for the future
77
How might a financial therapist facilitate the creation of an ethical will?
A financial therapist might:
* Prepare clients emotionally
* Guide in selecting recipients
* Encourage expression of feelings
* Provide a safe writing space
78
What is the proper role of a CFT-I in helping transfer wealth successfully?
The CFT-I can:
* Help parents teach children about managing wealth
* Address communication gaps
* Engage families in discussions
* Connect clients with other professionals
79
What specific skills should CFT-Is employ when working with wealth transfer?
Key skills include:
* Active listening
* Supportive education
* Helping clients articulate feelings
* Assisting with assertiveness
80
What unique value does a CFT-I bring to wealth transfer planning?
The CFT-I brings:
* Attention to emotional aspects
* Facilitation of difficult discussions
* Understanding family dynamics
81
What special considerations exist for financial discussions when clients have terminal illness?
Considerations include:
* Accurate prognosis is uncertain
* Consult independent medical sources
* Address palliative care discussions early
82
What are the top financial concerns of terminally ill clients?
Top concerns include:
* Having enough money for care
* Financial impact on family
83
How should CFT-Is adapt their approach as illness advances?
Adaptations include:
* Keeping informed through family
* Being aware of cognitive changes
* Addressing important issues first
84
How should CFT-Is handle situations where one spouse is reluctant to plan?
Strategies include:
* Encouraging the willing client not to nag
* Exploring the reluctant spouse's resistance
* Helping the willing spouse do individual planning
85
What perspective should CFT-Is maintain about the ultimate outcomes of wealth transfer?
CFT-Is should remember:
* Outcomes are beyond their control
* Relationships may last a lifetime or end at the client's passing
* Acceptance of limits on their influence
