The Situation

Kelly and Roger came to us after their youngest son, George, turned 10 years old. Their eldest son, Dillon, was 13 years old and their daughter, Rory, was 16 years old. With all 3 kids reaching “double digits”, Kelly & Roger were feeling overwhelmed with the many decisions in front of them.

What should they be doing to set their kids – the next generation – up for financial success? As a

multigenerational Family CFO, we were able to explore opportunities, develop a plan and implement strategies for each of the kids, before any of them reached the age of 18.

Dillon enjoyed his summer job of mowing lawns in his neighborhood, while Rory was enjoying her first job working at a retail store. George did chores around the house, but didn’t have an official ‘job’, being the youngest.

After talking to their kids about where to go for their next family vacation, Kelly and Roger realized their kids had a hard time grasping the concept of money and how much things cost. Kelly and Roger felt blessed they could provide so well for their children, but now feared how well they would fare as they entered adulthood. This is where we came in!

Our Strategy
After ensuring financial strategy for Kelly and Roger were on track, we focused on the kids…

First, we coordinated bank accounts for all three children in their individual names and under their social security numbers. Second, we researched and assisted Rory as she applied for a credit card. This provided the opportunity to share in-depth details around the right way to use credit. A credit card is a simple way to start building credit at a young age. If kids have an established credit file by the time they graduate from school, they are much more likely to be able to rent an apartment or purchase a house, rather than needing to move back home out of necessity. Additionally, we added the kids to the family credit monitoring account so Kelly could regularly check their credit scores, verify information, detect identity theft, and provide a scorecard for maintaining good credit.

Next, we met with Dillon & Rory and explained the benefits of a Roth IRA. (eventually we will talk with George when he gets his first job). If an individual, regardless of age, has earned income, they can invest using a Roth IRA. Contribution limits for those under the age of 50 are limited to $5,500 per year, and assets contributed to a Roth are removed from taxation forever. We also illustrated how Kelly and Roger could “match” their kids Roth contributions using annual gifting exclusions allowing for a multigenerational ‘boost’ to savings, thanks to the power of compounding interest!

Kelly and Roger had a balance sheet of roughly $3 million and wanted to ensure their children could go to the colleges of their choosing. They had 529 College Education accounts established for Dillan & Rory but hadn’t gotten around yet to establishing an account for George. As we reviewed the NCES data to estimate the full cost of college, we were able to adjust their contribution strategy to more accurately reflect the future cost of the most likely schools each of the kids would attend. With Dillan’s intent to move into the medical profession, the cost of college was significantly higher than Kelly and Roger originally thought. Roger’s parents were interested in helping with college costs so we connected with them to establish a 529 plan for George where MOM & DAD COULD GET A STATE TAX DEDUCTION FOR MAKINIG CONTRIBUTIONS TO GEORGES 529.

While it wasn’t an issue until the kids turned 18, we reviewed the importance of basic estate planning documents for the kids. Once kids reach the age of majority, schools are happy to take a tuition check from parents, but HIPAA and other laws may prevent the sharing of important information with parents. As such, before the kids went off to school, we agreed to engage their estate planning attorney to draft a Durable Power of Attorney (DPOA) and Health Care Directive (HCD). The DPOA would allow Kelly to act in a financial capacity on behalf of her children while they were away at college. With the HCD, each child was able to designate which parent they wanted to be able to make medical decisions on their behalf should they become unable to tell a doctor their wishes. Hopefully, these documents are never needed, but, if they are, for a couple hundred bucks, they are invaluable.

The Result

The day came when George graduated high school and set out into the world! By this time, Rory had graduated with her bachelor’s degree from a great university and was well into her career with a great nest egg already started for retirement. Dillon was finishing his bachelor’s degree before moving ahead to complete his MD. Dillon was living comfortably in an apartment he loved while enjoying his final days of undergrad. He continued to work through college and to this day, still maximizes his Roth IRA contributions! And George was ready to take on the world with his above-average credit score, strong understanding of the cost of his education, and fully prepared to take it seriously and excel in his school.

By working through Kelly and Roger’s priority items and including the children in family finances, we were able to refine and implement strategies across their financial lives, but also their next generation. We regularly look at life’s opportunities with our clients, often with a multi-generational focus, to accomplish unique family objectives.

If you would like to take a deeper look at your multigeneration financial plan, we stand ready to assist.