By Cyril Tuohy
Wealth and the amassing of it, is often pitched as a solution for many of life’s challenges. But wealth often turns out to be a real challenge for families. Many have neither planned for nor are prepared to deal with issues surrounding divorce, the loss of a spouse and the subsequent blending of extended families through remarriage.
The findings, detailed in the 2014 U.S. Trust Insights on Wealth and Worth, are compiled from a survey of 680 U.S. high-net-worth individuals with $3 million or more in investable assets.
“Families today come in all shapes and sizes, and the wealthy are not immune to the ripple effect of extenuating circumstances on overall family financial well-being,” Keith Banks, president of U.S. Trust, said in a news release.
Indeed, families or family-run companies often find themselves ripped apart by jealousies, torn asunder by bitter feuds, or bankrupted by factionalism and dissent.
For proof, people need look no further than the animosities surrounding extended family and estate of singer Michael Jackson, nicknamed the King of Pop.
The singer, who amassed a fortune in the hundreds of millions of dollars during his lifetime, was just about broke when he died five years ago.
All of which is why financial advisors stress the importance of having a plan and sticking to it, especially with a transfer of financial and nonfinancial assets over the next 20 years estimated at more than $15 trillion.
Yet many of the ultra-wealthy don’t have a plan to account for or frame the goals and parameters of an extended family, U.S. Trust said.
The survey found that 59 percent of respondents have provided substantial financial support for adult or immediate or extended family members – siblings, parents, children, nieces and nephews — but only 3 percent of the respondents have a financial plan to account for this.
Circumstances that affect family financial well-being include divorce, addition, untimely death or disability, medical crises and bickering over inheritance.
The survey also found that only 38 percent of married couples have a financial plan to address the cost of long-term care for both partners, and only one in 10 has a financial plan that accounts for the long-term care needs of aging parents, the survey found.
Banks said that approaches to wealth management “need to evolve,” and incorporate perspectives and roles and needs of the “modern family.”
The “traditional” family, in which children grow up under the same roof with their birth parents, is giving way to a more complicated family relationship involving step-siblings, half siblings, ex-spouses, in-laws and multiple generations living in close quarters.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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