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Posted by on Apr 25, 2014 in ETF Strategist

When Grown Children Get In The Way of a Successful Financial Plan

When Grown Children Get In The Way of a Successful Financial Plan

By Roger Nusbaum AdvisorShares ETF Strategist

There are often crossovers between my work in the investment industry and my “hobby” as a volunteer firefighter. Some crossovers are admittedly esoteric while some far more tangible.

Recently we had a call for a one vehicle accident. The patient was around 40 years old was visiting their parents who live in our community. The parents are in their mid-70s and from what I can tell are pretty similar to many clients of many advisory firms; there appears to be some wealth and they like to travel.

The accident was serious enough to require a helicopter flight from our fire station to Phoenix (we live about 95 miles north of Phoenix) and there may be some need for ongoing care after the initial hospital stay ends.

I don’t know the specifics of these folks’ financial or family situation nor do I know anything definitive about any ongoing care but the story raises an issue that many advisors and do-it-yourselfers may have to confront which is that an adult child may need meaningful financial support.

The reasons could be health-related like the above, legal (the grown offspring regularly gets into trouble) or some other event.

Without knowing the above patient’s insurance situation I can tell you that a helicopter ride costs about $20,000, surgery (if there was any here, not sure) could be at least that much and who knows how much therapy would be depending on how long it is needed (not sure if in this instance there will be any physical therapy but is possible).

So generically speaking parents who are 60 or 70 with a decent nest egg who as a function of an accident or their children’s bad behavior may have to decide whether to come to the financial aid of their child either out of some sort of legal obligation somehow or out of some sort of moral obligation.

While an advisor can’t really say what a client faced with this situation should do they do need to explain the financial consequence of helping a child with a medical or legal problem.

A $1 million nest egg would be greatly affected by an unexpected $150,000 bailing out of a grown child. In the case of an accident, yes the grown child may have insurance but if there are any gaps in what is covered that would come to light in this scenario. For example if the coverage for physical therapy was insufficient a parent of at least some means will certainly consider writing a check.

Perhaps even more seriously is the adult child who always seems to get into trouble one way or another. Chances are we all know someone who can’t quite figure it out. Some parents come to the financial rescue and some do not. Again an advisor can’t judge, he or she can only advise on the impact if any on the financial plan.