Financial Planning For The
Multigenerational Family

    Sam A. Dayhood, III, CFP, Montgomery

  It wasn’t all that long ago a family was only three generations deep. But as life expectancies increase, four generations are common. The financial impact of this demographic change has been dramatic. Instead of a focusing only on your own finances, you may have to deal with financial issue that cross generations. Here is a sampling of some multigenerational issues.

Aging Parents. Where once people lived only a few years into retirement, now they live 15, 20, 30 years or more. If parents can’t take care of themselves, or they can’t afford to pay for high-cost, long-term care whether at home or in a facility, children may need to step forward. A geriatric care professional may be helpful.

Have a heart-to-heart talk about health care issues, long-term care needs and your parents ability to pay for them. Do they have adequate assets? Should you buy long-term care insurance for them? Will they qualify for Medicaid assistance? What can you realistically do for your parents without jeopardizing your own financial future.

Passing on the Estate. This is the opposite issue - grandparents who have more than enough financial resources to take care of themselves. What do they intend to do with their money? Will they pass it on to their children and grandchildren while they are still alive and ease a potential estate tax problem? Or will they wait until death to pass on the estate? Will they spend a significant amount of their estate or donate it charity and thus force their heirs to make their own way in life?

Business Succession. Business owners need to decide well before they retire what they will do with their business. Do they want to sell to outsiders or keep it in the family? Is anyone in the family able and willing to run it? Don’t look down just one generation, perhaps a grandchild is the best choice. What tax issues are involved? This is a complex issue that will require professional guidance.

College versus Retirement. How do you provide children with advanced education while continuing to adequately save for your own retirement (and perhaps take care of aging parents)? Many financial planners suggest making retirement a priority. Children can find financial aid and work their way through college. You don’t get financial aid for retirement. Grandparents, especially those who face an estate tax issue, can directly pay their grandchildren’s tuition without creating a gift tax event.

These are only a few of the multigenerational financial issues that may face families. The issues are often complicated by the fact that people don’t like to talk about their money and that different generations often view money and its use differently. Consider bringing in financial professionals. They can explain complex issues in understandable terms, provide expertise with an objective viewpoint, and motivate action when needed.

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This column is produced by the Institute of Certified Financial Planners, a national association representing the top financial planners in the country, and is provided by Sam A. Dayhood, III, CFP, a member in good standing of the Institute. He can be reached at 334 270-3035.