I am increasingly concerned by the frequency with which my clients inform me their adult children are “bad with money.” While most adults over the age of thirty have a personal financial understanding of the impacts of the real estate market crash of 2008, and the subsequent national economic crisis that ensued, I am realizing we do not all have the same perception of the events that occurred. Many of my clients have watched their investment portfolio, including retirement funds, decrease in value significantly and then slowly recover over time. However, whether parents understand it or not, if your adult children are younger members of the Baby Boomer generation or are part of Generation X, our financial lives may have been deeply impacted by the national economy in ways older Baby Boomers were not.
What do I mean? Prior to 2008, when the national economy was seemingly strong, many of us were actually encouraged if not simply misguided by the opportunities offered by lenders and financial institutions to rack up insurmountable debt under unreasonable terms in our mortgage-lending. It was not just your seemingly financially irresponsible kids’ idea! The older Baby Boomers were not buying homes at such a frequent rate, perhaps because many of you already owned your home for many years at that time. What resulted from the real estate market crash was that many perfectly responsible adults were suddenly out of a job. A sudden lack of income coupled with unreasonable mortgage terms was a recipe for disaster for many people I knew. I admired people my age who rallied and took jobs in retail, restaurants or anywhere that would allow them to hold on to their homes.
Who knew that so many mortgage loans would become unaffordable and virtually every profession dependent on the real-estate market would be decimated? I never imagined that so many (even highly educated professionals) would be out of a job and forced into unforeseen financial challenges for many years to come. My generation went to college to get a better job, not just a job, and we knew there were jobs available for most of us prior to 2008, with or without a degree. However, the 2008 market crash did not pick and choose its victims. People lost their jobs regardless of financial intelligence, job experience or education. It’s been eight years, and having been a small business owner in a state with a poor economy in the interim, I have seen the long-term struggle in my community to overcome these economic challenges.
Were your adult children part of this younger workforce? Many of us had to reinvent ourselves professionally and figure out how to move forward without major financial devastation. Much of the younger families who lost their jobs, also lost their homes. Many families lost their homes because they simply had unreasonable terms on their mortgages, such as adjustable rate mortgages (ARMs) that were not affordable once the inflated adjustable interest rates kicked in. Many families had to file bankruptcy, even years later, because they could not recover from the national economic crisis that ensued after the 2008 housing market crashed. Many families were never able to replace the jobs and income they lost because jobs simply have not been available.
If this sounds like your child, perhaps this article will help you remember the true challenge the younger generation has faced in recent years and is hopefully overcoming today. If it is the case that your adult children really were the victims of circumstances beyond their control, you might more readily see that proper estate planning can protect your kids’ inheritance from many unforeseen circumstances (because none of us expected what happened in 2008). Now, it is entirely possible that your adult child actually is “bad with money.” Unfortunately, many of my clients can relay deeper concerns that pose a real need to protect the inheritance they are leaving to adult children who might be at risk of losing their inheritance to creditors or third-party claimants (a divorcing spouse, bankruptcy trustee, substance abuse, etc.).
Regardless, it is important for all of us to consider what might happen to the inheritance we leave our loved ones. One of my favorite aspects of my job is to find successful solutions for my clients – sometimes to risks they haven’t even thought of yet. This is the closest I’ll ever come to being a fortune teller, and the peace of mind I can provide is worth its weight in gold. So, Mom and Dad, even if I were bad with money I would still know that is a tremendous value I can offer to my clients.
At Morris Hall, we try to think of every possible scenario that could negatively impact your estate or the inheritance you are leaving behind, and we try to include every possible protection the law allows when we draft your estate plan. Call today to schedule an appointment with one of our attorneys, because we understand the risks, and can help you draft an estate plan that will work for you and your survivors.
Contributed by Morris Hall, PLLC Albuquerque Estate Planning Attorney, Leslie M. Thompson.
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