BY MARION SCHMEELK
The modern American family faces more complex situations than ever before, from blended marriages and multigeneration households to long-term medical care for parents and concerns over passing wealth along to their children. The new U.S. Trust “Insights on Wealth & Worth” survey of 680 U.S. high-net-worth and ultra-high-net-worth adults explored views on family, income equality and investing, revealing that as families become more complex, so do their challenges.
From the outset, the structure of the American family is complicated. Though the traditional family, with stably married parents and children remains the majority, the concept of family is evolving. Two in 10 are in a blended family, one in 10 lives in a multigenerational household and 20 percent choose to remarry after being divorced or widowed. This family structure makes finances increasingly complicated, as the distinctions of mine, yours and ours require more careful deliberation.
Dynamics are also shifting toward female members of the household taking a more active role in wealth planning and decision-making. Women are increasingly making a greater impact on family finances, as more than 52 percent come into their marriage or partnership with assets equal or greater than their spouse. Women continue to play a major role in income earning, with one-third then acting as the primacy income earner or contributing equally to household wealth. Along with this financial contribution, women are increasingly leading decision-making.
Despite the fact that six in 10 wealthy people have provided substantial support to adult family members, only three percent have accounted for such spending in their financial plans. A variety of unforeseen circumstances, including divorce, untimely death and medical crises, can leave any family, no matter their wealth, unprepared. Medical crises, as an example, are highly prevalent, yet less than half of married couples have taken the time to plan for the costs of long-term care for themselves and even fewer, only one in 10, have planned for long-term care for their parents. These circumstances are by no means unique to wealth families, yet they do complicate already complex wealth planning.
Another issue for families surveyed is parents”™ concern over the transferring of wealth to their children. There will be more than $15 trillion in financial and nonfinancial high net worth assets transferred over the next two decades, but that transfer often comes with parental concerns that their children are not prepared for this increased responsibility and lack knowledge about their family”™s finances. In fact, a staggering 96 percent of parents are concerned that their children are not mature enough to handle family money until they turn 25. This apprehension may be related to the fact that less than half of wealthy parents with adult children have fully explained their financial situation to their children and even fewer feel that their children are well-prepared for their inheritance. Parents are open to working on this problem, but that requires careful planning and education to build the financial skills and understanding of family wealth.
The traditional approach to wealth management needs to adapt and account for these changing circumstances. As the concept of the American family evolves, so must that family”™s approach to wealth. For wealthy families with already complex situations, planning, increased conversations and determining the appropriate strategy for their own unique situation is vital.
Marion Schmeelk is managing director and Fairfield County market executive at U.S. Trust. She lives in Rowayton. U.S. Trust operates through Bank of America, N.A. and other subsidiaries of Bank of America Corp.
