Adult Children With No Shame
Many advisors say this problem dwarfs all others. Some children never grow up to become independent, even when they are far into adulthood. Jonathan Pond, who runs an eponymous RIA firm in Watertown, Mass., has often considered penning a generic letter entitled “Have You No Shame?” to send to certain clients’ offspring.

More than a few of his clients are “getting sucked dry by children who couldn’t care less,” Pond says. “I’ve been seeing it for 40 years.”

Pond is not talking about a grandparent who picks up her grandchildren’s tuition for a semester or two when the child loses a job.  The problem, as he sees it, is that there can be a very thin line at first when “something to help a son or daughter through a rough patch” eventually “becomes an annuity.”
Part of the problem can be traced to the fact that the child probably was overindulged from the start. Pond says he has told clients to tell their children “to go on welfare” or the parents will end up in public housing.

One example Pond cites is that of a retired client whose assets were down to $1.5 million even though they were spending a modest $60,000 annually right in line with the 4% rule. He finally told the father to ask his son, a 60-year-old with a doctorate, to prepare an annual budget of what he needed. When the aging Ph.D. finished his assignment, his own budget came to $110,000 a year, almost double Dad’s.

Compounding the issue is the fact that parents can often be embarrassed about unsuccessful offspring and refuse to address the problem. Spending dynamics, especially with children, is an “emotional minefield,” says Mark Balasa, partner with Balasa Dinverno & Foltz in Itasca, Ill.
When the client doesn’t have the money, it should be the “end of the discussion,” Balasa argues. If the client does have the money, then it becomes “all about choices.”

Intra-family issues frequently surface after a family patriarch, often an alpha male and a control freak, dies, and “dear sweet Mom” is left to manage family financial affairs with which she has little familiarity, according to Dan Moisand, a principal with Moisand Fitzgerald Tamayo in Melbourne, Fla.
It’s commonplace for children to think, “Mom has more money than she’ll ever need,” when that may or may not be the case, Moisand says. If one sibling wants to start a business and make an investment, she is probably the first place he will turn.

In some cases, the grown up child’s action rises to the level of outright malice. Moisand says he has seen too many cases of adult children convincing a frail parent to take money out of an account on their behalf, and, if the parent is cognitively impaired, she may forget about it.

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