Monday, March 11, 2013

Downton Abbey: A series of unfortunate estate-planning mistakes!!

Kelly Greene writing in the Wall Street Journal  draws some great lessons from the Downton Abbey public television saga, which has an upper class English family bedeviled by plots twists involving bad estate- and financial-planning decisions.
It turns out financial advisers and estate attorneys all over the country are using Downton and the multi-generational Crawley family for what NOT to do.
To read the entire WSJ piece, "Money Lessons from Downton Abbey," WSJ March 1, 2012  click here.
You don’t have to be from the rich upper crust to benefit from this family’s mistakes. Any one who owns a home or other real estate, anyone who owns a family business or has investments can learn from this story that hinges on a series of financial set-backs, surprises and losses.
In a nutshell here’s what the series, which just ended Season 3, recommends us.
1. Sell the house. Inheriting an old house is more trouble than its worth. The Crawley family is saddled with a huge old house and sprawling estate that requires nearly all their money and a huge staff to maintain. Parents, reports Greene in the WSJ story, often over estimate the sentimental attachment of their children to the old family home. If the property ends up being owned my multiple family members, some will resent that any inherited money is going into house upkeep instead of to them. Houses can't force family togetherness, the experts say. It is hard for a family to agree on how to manage an old property, especially if one of them wants to live in it.
2. Spell out control and ownership when passing on a family-owned business. Sons in law (as in the Crawley family) may have different ideas for how a family business should be run. Make sure everybody is clear on who has voting rights, veto rights and the power to fire. Expect tension as the transition is made from parents to the new generation.
3. Use (legal) trusts to protect the family estate. Trusts can be helpful to two reasons -- tax planning and money management. A corporate trustee is a professional bound by investing rules. A trustee knows investments must be diversified and that actions must reported back to the trustee and the trustee’s family, in some cases monthly. (More about trusts, click here.)
While, your nephew, Tony, is a nice guy, he may have no understanding of finances or investing. Further more, he has no legal responsibility to tell anyone what he's doing with your money or property. He's really not legally accountable to anyone and could be badgered into complying with money demands from needy family members, never mind his own temptations.
With a trust, there's nothing to be done as when the Crawleys appeal to the earl's American mother-in-law (Shirley McLaine) to bail them out, She says she can't help because the assets are tied up in a trust. Oh well.
4. Make a will before giving birth. Have a will and business agreement in place for what would happen to your spouse and children if you die. Update this will every few years.
We will find out in Season 4, if Matthew Crawley had a will.
5. Set up a medical directive. Sybil, the youngest Crawley daughter dies giving birth. The family struggles to guess what her wishes would have been regarding her medical care or what religious faith she wished her baby to be baptized in. A will and a medical directive would have really helped.
6. The biggest lesson?  Diversify your investments. Things start to get sticky for the Crawley family, writes Greene, when the Earl of Grantham loses his fortune – actually all his wife Cora's money --- by investing in a Canadian railway company that goes bankrupt. It’s never a good idea to put all your money into one big investment.
Are you unsure of your investment strategy? Investor.gov is a good place to start learning more.
So thank you Downton Abbey for these family management lessons, as true today as 100 years ago. What will we learn about money and families in Season 4?

For more:
www.wife.org
www.investor.gov
www.wise-investors.org
www.wiseswomeninvestor.org
www.learnvest.com
www.bankrate.com

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