Making Cents: Grandparents as Boomerang Parents
By: John P. Napolitano, CFP®, CPA, PFS, MST
Some say that grand parenting is the best job on earth. You get to see the young ones when you want and you can leave whenever you want, unless you’re one of the many grandparents who were suddenly thrust back into a parenting role. If this does happen, and it seems as if it may be more than a temporary situation, consider hiring an attorney to ensure that you have full legal custody of the children. When you are the court appointed guardian, you obtain the full parental legal rights.
It’s usually a sad, tragic story, like a pre-mature and uninsured death, permanent disability, substance abuse or a nasty, financially depleting divorce. Whatever the cause, your life changes when you went from a retirement minded grandparent to the primary caregiver for grandchildren. To accommodate these changes, you may want to alter your financial plans.
Start with your cash flow. Do you have the assets to support children to the standard that you want for yourself and for them? From day to day living to a college education? Can you afford to hire help so that you may allot some of your 168 hours per week to enjoying your golden years just like you imagined?
If the children are under 18, you’ll need to appoint guardians under your will. Especially in the case of unfit parent(s), your choice of guardian needs to be binding and permanent. If any of the children are over age 18, ensure that they have their own valid legal forms such as a health care power of attorney or a durable general power so that you can act on their behalf. And if the parents of the child are unfit or unable to care for the children, they probably wouldn’t be good stewards for any of your assets.
In this case, you must consider ways to protect, preserve and pass down wealth so your grandchildren have the best opportunity to succeed. The most common method would be using trusts. Here you can have the assets remain in an account that is overseen by someone of your choosing while you’re living. You also set the terms and conditions regarding how assets will find their way out of the trust and into the hands of the intended beneficiaries when they need it. Because of the vast age difference between you and the grandchildren, these trusts may be most helpful if you restrict access to principal, allowing only discretionary distributions as determined by the trustee.
You may need to change your insurance. If you’re working and have the option to increase your life or disability insurance, this may be a good time to evaluate those options. Take a look at your personal coverage as well and make sure that you keep what your new needs would dictate.
John P. Napolitano CFP®, CPA is CEO of US Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. US Wealth Management, US Financial Advisors and LPL Financial do not offer legal advice or services.