Aug. 9, 2012 at 8:18 AM ET
In most families, any discussion about money and inheritances is going to be awkward at best and emotionally fraught at worst.
But these days, financial planners say, the already uncomfortable topic has become even more tense because the weak economy has prompted more families to give their adult children a financial hand. That’s causing tempers to flare among the other siblings, who may feel like they are being treated unfairly, or getting less of an inheritance, because they did everything right.
“The parental guilt, combined with the perception that it’s a difficult time in our society to find a job – for almost anybody – has produced a kind of a new (economic psychology) in families,” said Stephen Goldbart, co-founder of the Money, Meaning and Choices Institute, which advises very wealthy clients on family financial issues.
Of course, the perception of favoritism among siblings is nothing new, and money issues tend to amplify any sibling rivalry that already existed. But Goldbart, also the co-author of the book “Affluence Intelligence,” said the current economy has made people more anxious about finances.
Goldbart doesn’t necessarily have to look to his client base to see these issues. They’re also playing out among his friends of more average wealth, who are watching their adult kids struggle to find a job and get a good start in life. The unemployment rate for 20- to 24-year-olds was 13.5 percent in July, far above the overall jobless rate of 8.3 percent.
“We grew up with a certain American dream in mind and it kind of worked for us,” he said. “Clearly, that’s all shifted in the current generation.”
That explains the impulse to help your kids financially. And, Goldbart noted, there are times when it’s completely appropriate to help out adult children, such as a medical emergency or to pay for a child or grandchild’s tuition.
But in many cases, he thinks, it’s better for the family, and the child, to let them tough it out on their own.
“Most of the bailouts I have seen have failed,” he said.
For example, he recently dealt with a young couple who bought a house based on their dual incomes, but started struggling after one of the two lost a job.
After several months of trying to find work, the couple turned to one of their sets of parents for what was supposed to be a temporary help with the mortgage. But a month or two stretched into a year, and pretty soon the other sibling found out, and got angry.
“It splintered the family,” he said.
What’s more, he said, the financial aid didn’t end up helping. The couple still ended up having to sell the house at a loss.
“The art of parenting is the art of saying no. Saying yes is easy,” Goldbart said. “When it comes to money, that’s really true.”
Of course, most parents are hard-pressed to say no if their kids need help, financially or otherwise. And with economic conditions the way they are, many parents have come to expect that they will have to help their kids out.
A TD Ameritrade survey conducted last year found that more than four in 10 boomer parents expected that they would have to provide some financial support for their kids. Most said they would feel obligated to do so if they were asked.
Other financial advisers say they also are dealing with more frequent adult sibling rivalry.
“It’s coming up more and more,” said Sean Dowling, president of the Dowling Group, a wealth management firm in Stamford, Conn.
For Dowling, a typical scenario goes like this: The client comes in and says they are trying to help out one kid who has lost a job, is going through a divorce or has other money problems. But, they say, the effort to help out one kid is making the other siblings feel slighted and jealous.
Dowling’s first question is usually whether the parents can actually afford to help the kid out. His concern: That Mom and Dad will sacrifice their own financial future to help their children.
If a family decides they can and should help out one sibling, Dowling said they will often adjust their inheritance plans so that the other child is equally compensated later on. But he conceded that even those measures can sometimes fail, because money issues tend to be more emotional than practical.
In fact, it’s often not even about the money but about the feeling of being slighted by Mom and Dad. Dowling said he often finds himself acting as more of an emotional counselor than a numbers guy as he tries to work out an inheritance plan that will seem fair.
“You’ve worked so hard for whatever nominal amount that is, whether that’s a $100,000 estate or a $100 million estate,” Dowling said. “You don’t want your legacy to be that you were unfair or unjust.”
Although many parents are helping out their kids, they aren’t necessarily doing so happily. Fred Taylor, president and co-founder of Northstar Investor Advisors, said the frustration he hears is often coming not from siblings but from parents. They complain that they sent their kids to expensive colleges in order to get a good start in life and now instead find junior back at home, on the couch, unable to land a job.
“I think where the resentment’s probably going to be is in the parents,” said Taylor, whose Denver-based firm advises clients with at least $750,000 in assets. “They don’t want to take care of their kids anymore. They’re done.”
In fact, he said, some siblings may feel more pity than resentment toward the brother or sister who is still relying on Mom and Dad.
“The Americans dream is not to go after college (to) live with your parents,” he noted.