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I have a financial advisor. Is it also time for my adult children to have one?

I have a financial advisor.  Is it also time for my adult children to have one?

Time and time again, we hear from people in their 60s and 70s who wish they had developed an economic plan earlier in their lives. While there is no time machine where they can go back and interact with their younger selves, these people can often do the next best thing: encourage their adult children to do so.

As young adults reach their 30s and 30s, life begins to become more complex. They make more money, buy homes and start families. And their parents, who remember their own experiences, see that their children may benefit from talking to a professional financial advisor about their future.

For baby boomers with adult children, here are four events where it may make sense to discuss whether a financial advisor can help adult children get their finances in order and build a plan to generate wealth in the years to come.

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How they are paid becomes complex

Even if your son or daughter manages their money well and seems to have large savings habits, their finances may reach a point where complexity requires much more detailed planning. Examples include those starting their own business; a rising director receiving corporate shares; someone who becomes a partner in a growing business.

Many years ago, we worked with a man in his 40s who was promoted to the senior team of a large company and began receiving new forms of compensation. He needed help to understand how to navigate stock options, rights to share increase, share ownership requirements, deferred compensation and the associated tax consequences for each individual. We were able to help him navigate these new forms of compensation in the most tax-efficient way to meet his cash-flow needs and optimize his savings potential.

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They are starting to earn big salaries

Hands holding money.

When a person in their 30s or 40s starts making bigger dollars, they often save more, spend more, or both. Their tax returns are also likely to become more complicated. It is becoming increasingly difficult to determine how much money to save and where to save, especially if the funds are tied up in various forms of the company’s equity and deferred benefits. There can be many missed opportunities to save tax-effectively with larger dollars, such as knowing when to take advantage of certain benefits and how to best prioritize retirement savings accounts.

A more detailed plan is also needed to avoid “lifestyle creeps”. When a person or couple makes more money, they often spend more. Before they know it, they have become accustomed to making purchases at a rate or size that cannot be maintained upon retirement.

Many years ago, one of our clients introduced us to their daughter because she had just become a partner at her law firm. This was the perfect time to start planning as her income increased significantly as her cash flows and tax status became more complex largely overnight. Over several years, she has made the most of her financial opportunities by prioritizing and automating her savings plan and has avoided the temptation to call for lifestyle.

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When a couple starts or their family grows

A woman squeezes the cheeks of a small baby.

When a couple gets a new baby or adds more children to their growing family, their financial picture almost always becomes more complicated. Income may decrease temporarily or they may move from two incomes to one. Costs, on the other hand, almost always rise, as they have to pay or save for childcare and education, and there is another mouth to feed with and body to clothe.

Here is a good example. A couple, both with thriving careers in sales who earned a total income of about $ 250,000 annually, decided they would soon start a family. They wanted to make sure their family was financially protected and they did everything they could to save on the cost of having a child. We helped ensure that they had their financial plan in order, including building up the expected costs for children and education, advising on appropriate insurance policies and proactively ensuring that living documents were in place.

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Help prepare for a legacy

A man stands on a beach at sunset.

Over the years, we have seen many adult children inherit money and in almost all cases, and despite what one might initially think, we find that inheriting money does not cure financial problems. Sure, additional resources can help make life easier and ease the pressure in a fleeting moment. But like lottery winners who sometimes waste their financial windfall over a short number of years without a good financial foothold and habits, a legacy may not solve money problems for long.

By helping an adult child develop a financial plan before any inheritance is received, they will be able to form good habits and have a healthy relationship with money. There may also be benefits to going ahead and giving some of the money now to adult children they would otherwise inherit. Currently, you can give up to $ 15,000 per. Person without filing a tax return, and if you are married, you can give up to $ 30,000 to each one as a couple.

We encourage parents to absolutely take care of themselves first, but if there are excess assets relative to what will be needed to maintain their desired lifestyle for the rest of their lives, this may provide an opportunity. Parents can have the pleasure of actually seeing their adult children benefit from their generosity now, and they can also witness how their adult children spend a smaller amount before one day they are presented with a larger amount.

If you are planning to leave a large sum of money to your adult children, make sure it is the rocket fuel they need to help them move faster instead of adding gasoline to a financial brand that is out of control.

We understand that it is not for everyone to work with a financial advisor. And for those who are beginning to consider this option, it is crucial to examine any advisor and their business, as well as how they get paid. But for older Americans with adult children in their 30s and 40s, it is also important to help your children understand the benefits that can be derived from a long-term financial plan. It can be one of the most influential legacies you can leave them.

Associate Wealth Adviser, Brightworth

Josh Monroe is a CERTIFIED FINANCIAL PLANNER læ GP and a Chartered Financial Consultant designee who listens actively and plans thoughtfully to help clients achieve their goals. He joined the Brightworth team in 2019 as a financial planner. Prior to Brightworth, Josh spent eight years at a leading insurance and investment firm in a number of roles, including compliance and oversight. Josh is passionate about financial planning and makes complex concepts easy to understand.

Wealth Adviser, Brigthworth

Patricia Sklar is a wealth adviser at Brightworth, a wealth management firm in Atlanta. She is a Certified Public Accountant, a CERTIFIED FINANCIAL PLANNER ™ GP and holds the Chartered Financial Analyst® designation. Sklar uses its CPA and investment background to help develop and implement financial planning strategies for high-income, high-income individuals.

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