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FAQs for the Next Generation: Young Adult Edition

Posted by Leah Upton, CFP®, CRC®, CDFA®

I think my parents are well off.  What does that mean for me?

At this point in your life, you may have some idea of your family’s wealth from conversations you’ve had and observations you’ve made. To maintain family wealth over generations, it’s important to have open discussions in order to understand what this wealth means for you, your siblings, and future generations.

It will also be helpful to understand your family’s expectations as you enter adulthood. Are you expected to earn your own living and grow your own wealth, or will there be support or a future inheritance available to help you pursue your passion projects (or some combination of both)? There is no requirement that your parents leave the wealth to you. In many cases, parents struggle with the balance of providing support for their children while also not squelching their children’s own ambitions in life. Some initial areas to discuss to help you get your arms around your family legacy and wealth:

Defining purpose for the wealth

What does your family want to achieve with it? Does that include involvement from you and future generations? Understanding this involves defining success, goals, and values for both current and future generations. It’s also a great time to ask your parents for family stories or experiences that should be passed down to support a stronger connection and appreciation for the wealth.


Once you understand your family’s goals and intended legacy, you’ll be better positioned to learn about the strategies that have been put in place to meet those objectives. You’ll also be better able to understand the responsibility that comes along with being a steward of the wealth for your family. There are many approaches to growing and transferring wealth, minimizing taxes, and meeting objectives, whether they be family, business, or philanthropic. Working with your family to understand why they have chosen certain strategies over others will be a useful learning opportunity as you work to understand the different facets of the wealth.


Get involved going forward! Implementing and then monitoring family objectives and strategies should be an ongoing conversation that includes balancing your own ambitions and goals. In the best cases, wealth transfer should strengthen family values and meet family goals—not create burdens for the next generation.

Additional reading:

My parents told me that there is money in trust for my benefit. Why can’t I just get the money directly?

Before we discuss why a trust may be used, let’s look at the basic components:

Some benefits of trusts include:

Additional reading:

Why do I have to sign this letter saying I can withdraw money from a trust, but I don’t really get to do it?

What you are seeing is called a Crummey Notice. It allows the giver to make a “free” gift into a trust for your benefit. Without the notice to you, the gift wouldn’t be “free” as it would use up some of the giver’s ability to make other gifts tax-free.

Often these notices are issued because of a gift made to a trust to fund life insurance premiums. By not withdrawing that gift from the trust, you are leaving the assets there to either pay the life insurance premium (so the policy doesn’t lapse), or otherwise grow, resulting in significantly more assets potentially available to you in the future.

What is a prenuptial agreement and why should I care?

A prenuptial agreement is a written contract signed by you and your soon-to-be spouse. It typically defines rights you will have to each other’s property, discusses future spousal support in the event of divorce, and addresses the treatment of assets and income acquired during the marriage. Ultimately, it clarifies what assets and debts each person is coming into the relationship with and what each person will be entitled to if the marriage ends. These agreements are useful tools to ensure family wealth remains in the original family.

Often, it’s thought that asking your partner to sign this document means you don’t trust him or her, or that you’re already planning for a divorce before even getting married! Instead, it should be looked at like an insurance policy. No one buys homeowner’s insurance because they think their house will burn down. It is purchased so that in the rare instance there is a fire, not everything is lost!

Additional reading:

Charitable Giving Through a Donor Advised Fund

Posted by Leah Upton, CFP®, CRC®, CDFA®

Benefits, Risks and Getting Started with this Flexible Charitable Option for High Net Worth Investors

High net worth investors have the ability to take advantage of the benefits and flexibility that come with donating cash, securities, or other non-publicly traded assets directly to qualified 501(c)(3) organizations.

Charitable donations allow you to transfer wealth out of your estate while also receiving a tax benefit and making an impact with the qualified organizations you support. However, the value and timing of the tax benefit realized depends on the type of asset, the year in which it was donated, and the overall tax situation of the investor.

One way to maintain control and realize the benefit of your donation in the year that is most valuable to you is to utilize a Donor Advised Fund.

What is a Donor Advised Fund and what are the Key Benefits of this Type of Charitable Account?

A Donor Advised Fund is a charitable account that is sponsored by a public charity. This type of account offers several key benefits to you as the donor:

According to the National Philanthropic Trust, Donor Advised Funds have been gaining popularity in the U.S. over the last few decades as investors have been catching on to this useful tool for charitable giving that provides additional flexibility within a wealth strategy.   

Although this investment vehicle was created in the 1930s, it’s been gaining traction steadily since the 1990s. The number of funds, donations into the funds, and recommended grants out of the funds have all risen year over year for at least the last eight years. In 2017, assets in these funds also surpassed $110 billion–a new record!

Capitalizing on the Flexibility of a Donor Advised Fund

Because you can realize the maximum allowed tax deduction in the year the assets are donated to the fund, you’re able to pick and choose which tax years are most beneficial for your personal situation–such as a higher income year than normal–while continuing to make grants to the charities that are most important to you year over year.

In addition to providing timing flexibility, this charitable vehicle also makes it easier to donate non publicly-traded assets and private interests that a charity otherwise may not be able to take directly.  

As a high net worth investor, you may have already started a Private Foundation for some of the same benefits that a Donor Fund provides, such as being able to recommend investments, granting out to other charities at later points in time, and helping with family legacy planning by enabling the next generation to take over grant-making decisions. However, there are some differences worth noting that may make the Donor Advised Fund more appealing:

Some Risks of Utilizing Donor Advised Funds

Not all assets hold the same weight when it comes to the tax benefit that will be received in exchange for the donation. Donating long-term, highly-appreciated assets instead of cash is more beneficial and reduces the amount of capital gains tax that would have otherwise been paid if you sold the assets first.  Just like all donations, you need to be mindful of which assets are being donated into the sponsored fund.

Additionally, you’ll want to make sure the fund is titled in a way that you would want to be recognized (i.e. The Smith Family Gift Fund). However, grants out of these funds can usually be made anonymously, which you may prefer.

Also, you cannot recommend legally-binding pledges from your Donor Fund because you cannot receive an incidental benefit from the grant, which may put the irrevocable nature of this account at risk. Therefore, a Donor Fund can’t make a grant that would relieve you of your financial obligation. However, you can make a non-legally binding intention to qualified charities of your choice.      

Finally, just like any donation, the gift is irrevocable, meaning that wealth is no longer included in your estate and can no longer be used for personal needs once it is donated.  

How to Take Advantage of a Donor Advised Fund

Getting started with a Donor Advised Fund is simple and usually requires a minimal initial donation amount to be made. The fund can likely be opened with your existing custodian (such as Fidelity, Charles Schwab, or your community Foundation), which makes it even easier to keep track of and use for your charitable giving!

High Net Worth Divorces Put a Lot at Stake

Posted by Leah Upton, CFP®, CRC®, CDFA®

How to Choose the Best Way to Approach Your Divorce

Ending a marriage can be a difficult decision–in part because of the emotions involved coupled with the decisions and potential concessions that may now need to be made. Depending on the nature of your separation, these decisions can be quite contentious– and perhaps even more elevated when high levels of wealth are involved.

The Importance of Approaching Your Divorce with a Clear Head

For a multitude of reasons, divorcing couples often want to rush the divorce through by immediately hiring divorce litigation attorneys. However, it’s most important to first ensure you’re approaching the situation with a level head. Evaluating and processing the situation will help you make sound decisions around the divorce proceedings, ultimately helping to keep your assets, interests and legacy properly protected.

Approaching the situation with a clear head will also better enable you to choose the best option through which to execute your divorce. For high net worth couples, there can be a lot at stake, and handling the proceedings in the way that is best for you and your family can mean the difference between a satisfactory conclusion that all parties agree with, or one steeped in resentment that can affect a wealthy spouse far past the time of divorce.


If you and your spouse choose to hire litigation attorneys, you would each obtain separate counsel to represent you in court. This option may make the most sense for a high wealth couple since each individual has so much at stake, and these big matters–such as child custody, spousal support, division of wealth and assets, retirement accounts or business ownership–simply cannot be settled without outside counsel.

However, there are some drawbacks to litigating a divorce. In addition to being expensive, this process is time consuming, impersonal, and will become public record as it plays out in court with document submissions and expert and witness testimonies. Ultimately, the judge will decide the outcome of child custody, child support, division of marital property and spousal support.

While it is helpful to have these big decisions handed down from a judge, you should keep in mind that this process is lengthy and expensive. Depending on how long it takes to litigate your divorce, it can be a significant drain on even the wealthiest couples’ assets.


Not all divorces are contentious. Many couples are able to separate on good terms and choose to discuss large matters like child custody and the division of their wealth without hashing it out in court. In this type of situation, mediation is a good option to consider.

Mediation allows you to meet with a neutral third party throughout a handful of sessions to focus on a resolution and agree on a settlement together. Mediation is the shortest and most cost-effective method of dissolving a marriage, and could be a consideration if you and your partner are dissolving the marriage on agreeable terms.

Collaborative Divorce

To preserve your marital estate and maximize assets for you and potentially the next generation after your divorce, a good option to consider is a collaborative divorce. This option lies between litigation and mediation as it allows you and your spouse to diplomatically negotiate the terms of your divorce, even if you have a highly-complex marital estate.

In a collaborative divorce, you and your spouse hire your own attorneys and work together throughout a series of meetings with the goal of negotiating the terms of the divorce in a diplomatic and discrete way.  Your attorneys will likely still solicit the help of a neutral third-party mediator, in addition to party-neutral professionals such as child custody specialists, financial professionals, business valuators, and mental health experts.

Once you and your spouse have agreed on a settlement, it is simply filed with the court.

There is some risk with a collaborative divorce–if the settlement cannot be agreed upon, the parties must both hire different attorneys to represent them in court and the outcome will be in the hands of the judge.

Ultimately, you need to choose the approach to your divorce proceedings that works best for your situation. However, regardless of what you choose, make sure you have trusted professionals and advisors on your side to help you avoid missteps or long-term financial pitfalls. While it may be tempting to rush through divorce proceedings whatever the cost, your advisor can help you think about your future financial situation versus the immediate settlement terms, so you can make the best decisions that will have positive lasting effects.