Parents: Beware the entitled child. He or she can lead you down the path of ruin.
Estate planning is about more than simply signing a will and power of attorney. It is about looking at your whole financial picture, including recent or recurring gifts from you to a family member.
Often these types of gifts start innocently enough when you are employed and have sufficient cash flow to pay them. They only become a danger when they continue into your retirement years. If you are like most people, when you retired, your income decreased or became fixed. You have less discretionary money to spend. You may be pulling from savings, either through required minimum distributions of your IRA or liquidation of assets, to cash flow even normal living expenses. And the gifts? Those come from your savings, too.
If you are retired and have continued a pattern of giving money and assets to an adult child who is not disabled, then you need to evaluate if that is a good idea.
Remember, everything is relative. If your net worth is $10 million and you give your two children each $15,000 every year (a total of $30,000), then that is no big deal. If your net worth is only $500,000, then giving away $30,000 a year is a very big deal indeed.
To be fair, your adult children may not know about your financial situation. Many children would stop seeking or accepting parental gifts if they knew that the gifts were causing their parent a financial hardship. They certainly would not think less of you for stopping or slowing down the gifts. They might, in fact, applaud you for making a sound financial decision.
But there are some children who would not care. If you told them that you had only $500,000 to fund your retirement, then they would lay awake at night figuring out how to get all of it. Let’s call those children what they are: narcissistically entitled.
“Narcissistic entitlement” is a belief that one’s importance, superiority or uniqueness should result in getting special treatment and receiving more resources than others. Mayo Clinic notes, in a profound understatement, that narcissism can cause problems in many areas of life, such as relationships, work, school or financial affairs.
Signs include expecting special favors, insisting on having the best of everything and taking advantage of others to get what they want. People with narcissistic personality disorder can become impatient or angry when they don’t receive special treatment, easily feel slighted, interpret innocent acts as an insult to self-esteem and react with rage or contempt. They are unlikely to think that anything could be wrong with their personality.
Such people cannot be cured. They cannot be shamed. They expect their parents to give them money or assets, pay their bills and bail them out of situations. These children do not hesitate to plead, guilt, harangue, bully or physically intimidate. They often will not keep a job or support themselves, although they are able to do so.
In short, adult children suffering from narcissistic entitlement can be an aging parent’s worst financial nightmare. It is up to you to save the situation.
If you are dealing with such a child, then you should talk frankly with your attorney and financial adviser. You may need to protect your assets by moving them into a trust and naming an independent third party as a trustee or taking some other proactive step.
Virginia Hammerle is president of Hammerle Finley Law Firm and board-certified by the Texas Board of Legal Specialization in civil trial law. To receive her newsletter, email email@example.com or visit hammerle.com. This column does not constitute legal advice.