Attitudes and Aptitudes

You’ve considered your notions of family and made some basic decisions about who’s in that group. The next step in effective planning is to do some critical thinking about what kind of person you are and what kind of people your family members are in terms of money management. And don’t just laugh this off by saying “broke” or “incompetent.” The purpose of this step is to make decisions about managing family money that are realistic, given your own tendencies and those of the people who’ll inherit your family’s resources.

With members of the World War II generation passing their assets to Baby Boomers...and the Baby Boomers, in turn, passing assets to their children, more money will pass from one generation to another in the first half of the 21st Century than the rest of American history combined.

No matter how unprepared you may feel, you’re going to pass some kind of financial legacy onto your loved ones. It might as well be well thoughtout. Managing family money, like parenthood, is a responsibility that often forces self-centered people to become less self-centered. So, you need to ask yourself: What kind of money person am I? To prevent this question from spinning out of focus, consider how your finances relate to each of the following common issues:

• Timeliness. Do you adjust your plans with the birth of children and grandchildren; sale of a business, home or
other large asset; marriage or divorce, death of a family member; change in guardian or relocation? Any of these everyday facts of life can render your financial plans out-of-date.

• Organization. Do you have a detailed inventory of what you own, what you owe and where accounts or assets are
located? Wills and trusts often include these inventories; but they can become obsolete as circumstances change. That’s why smart planners keep separate asset inventories...and update them at least once a year.

Make sure everything is on the list—cash, liquid investments, business interests, loans or notes, real estate, collectibles, personal papers, etc.

• Clear (or clearly-defined) title. Do you know precisely who owns the assets in your estate? For example: How is the title to any real estate structured? Are you the sole title holder? Are you a joint tenant with a spouse? These matters control how the assets are transferred.

• Communication. Do your family members know what you want? Many problems arise because beneficiaries or distributees (the heirs getting the money) don’t know what the grantors (people leaving the money) wanted.

The confusion may begin before your death, if you become incapacitated. This is why living trusts are useful; they state how you wish your affairs to be handled if you can’t speak for yourself. Without something like this in place, you may force family members to make quick, unprepared decisions about your medical care...and the family’s resources.


• Beneficiary designations. How you define who gets family money can become an issue itself. Part of this is mechanical:
Naming a revocable trust as a beneficiary will usually force accounts to be liquidated and subject to income tax after you die. Part of this is personal: Naming specific heirs often means someone doesn’t like the result.

• Life insurance. Simply buying a policy with an X dollar benefit isn’t enough.

Setting up the right structure can almost double its value. If you name your spouse as beneficiary, proceeds will go to him or her tax free at your death because of the marital deduction but any money left will be taxed at your spouse’s death. If you transfer ownership of the policy to an irrevocable trust while you’re still kicking the proceeds will go to the trust when you die...and it pays less tax (usually).

• Gifts. One of the smartest ways to transfer money is to give it to family members slowly and steadily. You can give up to $10,000 per year to any person free of gift tax. (If you’re married, each spouse can give $10,000.) Some people are hesitant to do this because they think it means losing control. It doesn’t have to; but it will require financial discipline over a long time...so you hope. We’ll consider all of these matters in more detail as we proceed through this book. The point of this exercise is to help you realize what kind of money person you are. Have you made plans that deal with the seven issues we just described? If you answered “yes” to all seven, you’re a conscientious planner who’s already ahead of the game; if you only answered “yes” to one or two, you don’t like thinking about money and you need to start. There are two kinds of people: accumulators of wealth and distributors of wealth. The two are simply different sorts of people different attitudes and

inclinations. Accumulators are savers and planners by nature. Distributors spend more than they save. Of course, there are exceptions to that solute stance. It seems more accurate to say that different people at different stages in life may be savers or spenders. It’s certainly easier to accumulate when you’re single and unencumbered than when you’re putting
a couple of kids through college. And even incorrigible distributors of wealth want to leave their worldy goods to the people they care about most. After all, someone who’s spent more than he or she has saved over the course of a lifetime
should have a lot of cool stuff.

You can be a spender and a planner. In fact, if you are a spender, you need to make a concerted effort to plan...precisely because it may not come naturally to you. If you’ve never done anything about any of the issues we described in the previous couple of pages, reread those pages. There will be more information about what to do about each topic in the coming chapters.

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