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Practice Makes Perfect: Tips for Successful Family Role Transitions

Anchin Private Client CenterSeptember 30, 2021Mela Garber, Tax Principal

Practice Makes Perfect: Tips for Successful Family Role Transitions

As many families will tell you, wealth is often accompanied by increased financial complexities and responsibilities. Because of the many intricacies and moving parts involved, many families operate in a manner that is similar to how one might run a corporation.  Each member handles certain tasks that help the family run smoothly as a unit.  Typically, one of the spouses handles financial responsibilities, such as investments and bill paying, and the other spouse may be responsible for tasks related to the home, lifestyle, or caregiving.  If a family includes teenagers, they may have their own duties, such as taking the trash out or walking a dog.

Many corporations have a plan in case the person that runs the corporation is not available, gets sick or dies suddenly.  Unfortunately, this is not usually the case with families. When a family patriarch or matriarch suddenly gets sick or dies, the other spouse is not always properly prepared to take on the responsibilities. This can lead to financial losses and anxiety for the surviving spouse at a time when he/she is most vulnerable.

What should families do to avoid the hardship caused by an unexpected event? If there is a disparity between family members’ involvements in financial affairs resulting in one person holding most of the responsibilities, the spouse that handles the finances should educate the other spouse on the processes involved and requirements of fulfilling the responsibilities. Both spouses ideally should be informed and involved periodically with investment and banking transactions. Both spouses should have visibility on the accounts in existence and have access to the necessary login information. Perhaps once a quarter, the spouse who is less active in the family finances should shadow the other spouse while they transact to get familiar with the process and learn the steps required.  Spouses may want to prepare notes with instructions, as it may be hard to recall information while under stress, and if one spouse has to assume financial responsibilities because of the loss of the other spouse, their grief may hinder their recollection. In instances where a family has sophisticated investments, the nonfinancial spouse should be introduced to the advisors and have their contact information readily available.  In terms of the bill paying process, it would be beneficial for the nonfinancial spouse to handle the bills periodically.   Practice makes it easier to step in if there is a need. 

Both spouses should know the location of important documents such as power of attorneys, beneficiary designation forms, trust agreements, birth certificates, and a list of all doctors and their contact information. In addition, it would even be helpful to have a list of all the family’s service providers, such as plumbers and handy men. 

One relatively new class of asset requires special attention – holding of cryptocurrencies.  While it is relatively easy to track the traditional investments such as marketable securities and other investments in the publicly traded markets, it is not as easy to oversee the holding of the cryptocurrencies.  Even if a surviving spouse knows that these investments exist, not having the login and private key information will prevent the spouse from accessing the cryptocurrency investments and could result in the loss of those assets.

One way to prepare for unforeseeable events is to have a “fire drill.” For example, pretend that one spouse is totally unavailable so that the other one has to carry out their responsibilities. Can he/she access the cash and pay the bills on their own?  Can he/she reach their trusted advisors, or their plumber?  Having these practice sessions can help to identify problem areas so that the couple can troubleshoot them, preparing each person to handle responsibilities outside of their comfort zone. For more information or to discuss specific planning, contact your Anchin Relationship Partner or Mela Garber, a Tax Principal in Anchin Private Client at mela.garber@anchin.com.

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