"One third of parents with children aged 18-34 are willing to have a less comfortable retirement to support their children."
More and more U.S. parents are concerned about their adult children's financial situation and are willing to put their own financial well-being at risk to support them, according to a report issued by the BMO Wealth Institute. The report, entitled "The Bank of Mom and Dad: a Source of Comfort for Everyone," found that parents with children aged 18-34 would be willing to make sacrifices to provide financial support for their children. This willingness shows the anxiety parents have about their adult children's future well-being, says CNN Money in a recent report, "Half of U.S. Parents Would Retire Later to Support Adult Children Financially."
An experienced estate planning attorney can assist parents with this concern to reach their own financial goals, including retirement—and to add in financial support to their children into a comprehensive plan.
Parents should remember that today's young adults face unique financial challenges and may require different levels of support than they themselves received. If parents and children talk about the amount of support they expect to provide or receive, they can avoid misunderstandings that could jeopardize their financial futures. The report offers parents the following financial planning tips:
- Start Early. You should try to teach your children about money at an early age. Understanding the basics of personal finance at a young age can help set up a child for future financial success and independence.
- Implement a Roth IRA. A Roth IRA can make savings more tax efficient and extend parents' ability to use their resources to meet financial goals. Although annual contributions are limited by IRS guidelines, income earned in an IRA is generally not subject to any federal or state tax.
- Take Advantage of the Gift Tax. When possible, use the exceptions in the federal gift tax rules to increase the benefit available to children and dependent parents, such as gifts made for tuition or to pay medical expenses.
- Leave a Legacy of Financial Comfort: Parents can make certain that their estate plans, including wills and trusts, adequately provide for their children. In addition, sound insurance planning can be used to supplement the income of a surviving spouse or to support children who may be struggling financially.
Sadly, much of what passes for estate planning today is little more than word processing. Someone asks a few questions and then fits you into their pre-defined box. This isn’t planning – This is simply document preparation. Don’t settle for word processing in place of quality planning!
At Idaho Estate Planning we will take time to get to know you, your family, your desires, your concerns, your goals, and any potential future problems. Your estate plan should be a custom fit not a “one size fits all”. Remember, good planning is no accident.