Why Choosing The Right Fiduciary Is So Critical.

When you execute a Power of Attorney and designate a fiduciary (Attorney-in-Fact), you are granting an enormous amount of power to that person. Perhaps you have already executed a POA and have named one or more family members to act in your interests financially. They are your family, maybe your children. You should be able to trust them, right?

A cautionary tale.

Will the kids take on the task of protecting your financial well-being and do the right thing? Over time, the dynamics in your family may change. People change. Are the persons you have entrusted to represent what's best for you still the best people for the job?

It might be wise to revisit those legal documents from time to time and ask yourself a tough question--are your fiduciaries are still up to the task? Talking to a qualified estate planning attorney is a good first step to ensuring that your legal instruments still reflect your needs and best interests.

"We're Spending Our Children's Inheritance!"

You usually spot that message on bumper stickers attached to big RVs. It's kind of a glib slogan, but when you think about it, maybe it's not such a bad idea. (You're probably thinking this sounds harsh, but hear me out...)

You've spent your adult life working hard and building up a nice nest egg. Now comes the time to reap the benefits--enjoy what you've been working for all those years. Buy a vacation home, travel, take up a new hobby. Live your retirement years to the fullest and perhaps leave just a modest sum for the kids. It's your money. Sure, the kids might love to inherit a big pot of money, but is that really the best thing for them? Would leaving a large inheritance help them, or would it create problems for them? 

There are some points to consider on whether to leave a big inheritance.

• If an adult child has addiction or money problems, giving them a large inheritance may only magnify the problem.
• Money may (and often does) create conflict among family members. Grief amplifies that.
• It's human nature for people to be less careful with money they didn't have to earn. Statistically, roughly half of them will just blow it anyway.
• Leaving a modest inheritance encourages children to not rely on it to solve all their money woes.
• Perhaps your children are already finding their way financially and they don't need it.
• The kids might be burdened with tax liabilities if the estate is large.

A couple possible alternatives:

• Show your generosity by giving family heirlooms instead--something they would treasure and hand down through the generations. Those are the things your kids will remember you by.
• Another option: Give them some of their inheritance early--there is a $15,000 per person per year gift tax exemption. Perhaps put it into an investment, like a college fund or earmark for a home down payment.

The take-away point I'm making is this: There's more than one good way to leave an inheritance to children. You may wish to leave it all to the kids, and that's fine. On the other hand, maybe you don't want to leave so much, and that's OK, too. It's your money, and you should do what you feel best with it.

Whatever you wish to do, it would be prudent to talk to a financial planner and/or tax advisor on how to best manage your assets now. It would also be prudent to talk with a qualified attorney to discuss options for your estate plan.