Armanino Blog

Therapeutic Accounting®: Giving Up Control

Many of my clients are 15 or more years older than I am. They have been my clients for many years, some since I co-founded RBZ almost 40 years ago. In many situations, I have also been doing work for their children and grandchildren.

One thing for certain is that everyone, no matter how old, ages at the same pace. Whether you are 85 years old or 15 years old, everyone ages one day at a time. A day may have more significance for an older person, but it is still one day.

Due to the relationships I have formed with the different generations of my clients’ families, I sometimes find myself in a conflict situation. Many times the younger family members believe that the older generation should give up the control they have over their assets earlier than the older generation believes is necessary. Whether the concern of the younger generation is greed or true concern and that the older generation may feel badly about their loss of mental ability to do what they have done so successfully in the past is not the issue here. The question is, “Can the older generation recognize the proper time to make their lives easier without feeling that they may lose full control of their financial lives?”

Due to the relationships I have developed over the years with many of these families, I have been asked to intercede in various different ways. In several situations, I have been named as trustee (or co-trustee) and executor. The general comment from many of my clients is, “If I have trusted you for all these years, why wouldn’t I trust you after I have died or have become unable to handle my own financial life?”

I truly appreciate the honor of representing my clients in any manner that they may see fit. At times, I have to recognize that a conflict could exist between the older and younger family members. I have had children of some of my older clients express concern that their parents may ‘waste’ their potential inheritance. I have tried to explain to the children that until their parent has NO ability to handle their finances, the assets are theirs to do with as they wish. Children should not depend or ‘wait’ to move forward believing that all their problems will be solved when their parent dies (there may be nothing for them to inherit if the parent deems it that way). I have had these issues with parents as young as 50 and, of course, those much older.

I currently have three very unique situations for a few of my older clients that I am working on. I have to handle each of them differently, as the situation calls for them each to be handled in their own way.

The first case is a client in their mid-80’s. The spouse of the client that earned and invested their assets died many years ago. Several years ago the client remarried a person who is 25 years younger, due in a large part to the negative actions of this client’s children. This client is currently not in the best of physical health and certainly not in good mental health, especially when it comes to finances. I am currently this client’s co-trustee as it was recognized by the family and the court system that this client could not handle their financial affairs. This client still cannot understand why they are not the sole trustee, but continues to become more and more confused as the days go by. It has been recommended that this client give up their co-trustee status so that both the children and the client’s spouse will stop trying to force my client to make decisions that may not be in the client’s own best interest. This client is slowly giving up more and more control but has not yet accepted the real situation that this client is in. I believe that this client will give up control in short order.

In a second situation, I have a client in their early 90’s who at one time was an excellent business person. This client not only knows how to make money, but also how to invest it wisely. Also, this client is very generous in charitable giving. This client lost their spouse many years ago and remarried. The new spouse has never made a real connection with my client’s children and has children of their own as well. My client’s health is deteriorating, as is their mental ability to handle their assets. This client is smart enough to be aware that they are ‘slipping’ and soon will no longer be able to handle their financial affairs. This client has asked me and another trusted professional to step in now, not at death, and become co-trustees due to concerns that the client may not be able to recognize the need to do this in the near future.

In the third case, I have a client in their early 90’s who has also done a fabulous job of making money and investing it wisely. This client’s mental health is not great and they know it. However, the client is scared to give up any control that they currently have. Upon this client’s death, the client’s children will become co-trustees of the estate. One of the children is very business savvy, whereas the second child is not. In order to make sure that one child does not take advantage of the other child, my client has made me the ‘tie-breaker’ trustee. This means if both children agree on something, my input would not be needed. However, if the two children do not agree then I would cast the ‘tie-breaking’ vote. Even though this control has been put in place, it will not be used at this time as the client still is not ready to give up control.

As you will note, all three of these situations are quite different, as is true in all families and estates. The one common thread in all estates is the need to recognize when control should be given up, if at all (other than death). You need to be honest in looking at yourself to decide when it is time! I only hope that I will be smart enough to know when it is my time to “give up control.”

Therapeutic Accounting®
Harvey Bookstein has more than 40 years of public accounting experience, and he specializes in estate planning, charitable giving, and dealing with financial issues relating to children, divorce and successions planning for businesses/wealth from one generation to the next. When dealing with these issues, Harvey developed a method he has registered as Therapeutic Accounting®. Harvey’s approach is to not only look at a particular business, financial or personal issue—but to look at the specific issue as part of the “big picture.”

March 18, 2014

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