The dilemma: When my husband died, my son took charge of my finances and I admit I was happy to let him. He said I didn’t have to worry, that between our investments and life insurance I had over $4 million and I was a wealthy woman. We went to his advisor and put everything into joint names so he could take care of it for me. We made some investments that are not paying me income, like a $1 million mortgage on his house which he can’t afford to pay on, and some land for future development with a group of his friends. I also bought an expensive life insurance policy.
I’ve been living my life, traveling with friends, playing bridge and golf at my club, shopping and spoiling the grandchildren. Each time I asked if I could afford something, he told me not to worry.
I have Social Security and a small annuity going into my checking account, and I call for money when I need it. This last call for $50,000 scared me, as the advisor said I was spending principal. We had a meeting with my CPA to go over everything and I’m horrified to find out that my son thought of this as “our” money and not “my” money and has been borrowing from the portfolio right along to keep his lifestyle going. There is now less than $2 million in the account with a loan of $700,000 against it. I had no idea.
My son and I are very close. He didn’t think he was doing wrong, and he meant to pay it back, but he can’t. The extra borrowing got out of hand. This cannot continue. I’m 76 and healthy with good genes.
Am I selfish to want my luxurious lifestyle? Is it fair to ask him to sell his house so he can return the $1 million so I can get income? And what about the $700,000 loan? Some was for me and some was for them. I’m disappointed in the advisor, too. He should have been watching out for me. I’m scared and wracked with guilt.
Meg’s solution: Unfortunately, not everyone is going to look out for your needs. That’s why I advocate advisors independent of each other, for checks and balances. Your CPA and wealth advisor and estate attorney should plan together with you and for your best interest. Your assets should have gone into a revocable trust, not a joint account with your son. But that’s water under the bridge and will need to be dealt with now.
No, you’re not selfish, and your husband, if he were here, would agree. If there’s turbulence when you fly, the pilot encourages you to put your oxygen mask on first if traveling with children. I believe the same thing should apply with family wealth. You take care of yourself — that’s your job and this is your life. If you’re OK, you’ll be able to help the kids when needed, within reason.
Immediately put a team together and create a financial plan to lay out the puzzle pieces of your financial world. Be sure to determine what kind of income you need or want. Have them evaluate your portfolio to see what makes sense for some growth with enough income for you to live on. If you still want to treat the kids and grandchildren, write that into your budget. It’s not theirs to take, but it’s yours to give for your pleasure as well as theirs.
Now, can you afford to live comfortably without that $1 million mortgage after paying off the margin? That would leave you $1.3 million which can provide about $4,000 a month income, but no extra chunks. If that’s too tight, he has to sell and pay you back.
Of course you can decide to give the mortgage to your son now and let him make the decision as whether they live there without the benefit of your portfolio, but why? This is not a matching kidney for his health. It’s money and it’s yours. Big difference. Hopefully he’ll understand what this has done to your security and want to make it right.
Under no circumstances should you feel guilty — or bullied. A girl has to take care of herself.
Got a dilemma? Email askmeg@ meg green .com. Meg Green, CFP, is a wealth manager with offices in Aventura. Her Money Dilemmas column runs monthly in The Miami Herald.