What do your overseas investments have to do with medical care and family dynamics?
Picture this: A couple in their seventies who have invested a substantial portion of their wealth in U.S. assets. They are comfortably retired in Israel and have Israeli grandchildren. Unfortunately, some of these grandchildren face health challenges that require financial assistance beyond what their kupat holim (HMO) provides.
I recently met with this couple who needed advice determining how much they could help a disabled grandchild without risking the financial stability of their own retirement. They had questions both about their own cash flow and whether their investments were robust enough to cover their grandchild’s medical bills. Moreover, they disagreed about their moral obligation to give money to help their child/grandchild.
Since I have seen many similar scenarios while helping olim with their U.S. brokerage and IRA accounts, I wanted to provide some practical steps for families dealing with a medical crisis.
Understanding the Challenges
I have learned that the key to success is listening and gaining an understanding of each family’s unique situation. It’s not just about numbers and averages: it’s about people, their dreams, and their challenges. In the case of these retired olim, their primary concern was how to continue supporting their family in Israel, especially the grandchildren who are facing health issues, while also being financially fair to their other children.
Navigating Financial and Emotional Waters
The dilemma faced by the retired couple is not uncommon. They are not only facing a financial decision, but a moral question about how to help family members. Their challenge is finding a balance between financial responsibility to themselves, their children/grandchildren, and dealing with the emotional weight of helping one child’s family more than another’s.
In order to resolve the tension between helping with grandchild’s medical needs, maintain financial security, and sustaining positive sibling relationships, together we identified the following two considerations:
Understanding Priorities: The couple’s immediate concern was the well-being of their sick grandchild. This was their emotional and financial priority. However, stepping back, they realized that this was their second financial priority. Their first was securing their own financial future. After analyzing their income/expenses and projecting into the future, we determined that their portfolio had sufficient resources to help their family without impacting their own financial security. They could maintain a more conservative portfolio which provided income and was at a risk level that was appropriate for retirees.
Long-Term Considerations: They also needed to consider their other children and healthy grandchildren. While this couple’s other children were financially stable, my clients wanted to be financially fair in their long-term planning. They wanted to avoid a hidden grudge by one branch of the family that another branch was receiving more than a fair share of their resources.
Strategic Solutions: Creating a Stable Financial Future
The crux of the matter for the client was finding a way to support their family without jeopardizing their own financial security. Here’s the strategy we devised:
Emergency Fund Utilization: Their investments in the U.S. served not only as a future inheritance to their family, but also as an emergency fund. Medical care for a grandchild qualifies as an “emergency” and as such, some of these funds could be used without impacting their daily financial needs. The rest of the emergency funds were placed into a conservative money market account. Since the client’s goal was to take care of their family both now and in the future, we compared creating a growth-oriented portfolio with a larger potential inheritance in the future versus a more conservative portfolio which would cover their family’s immediate needs.
Estate Planning: Discussing the distribution of their assets after their passing was crucial. While it’s common to want equal allocation among children, special circumstances like health issues can justify a different approach. I encouraged the couple to discuss the situation with all of their adult children, and make sure there would be no unexpected financial surprises when they passed, may they live a long and healthy life.
Planning for the Unforeseen: Tools and Techniques
A Disability Trust, often known as a Special Needs Trust, is an essential tool we discussed for providing financial support to family members facing health challenges. This type of trust is designed to offer financial aid without compromising the beneficiary’s eligibility for government assistance programs. Note that trusts can be complicated when they cross borders (and tax codes). Make sure any trust creation that encompasses people in different countries is created by a professional well-versed in cross-border trusts.
Moreover, the trust can be structured to cover a variety of life-enhancing expenses beyond basic needs, including personal care attendants, medical and dental costs not covered by insurance, educational pursuits, recreational activities, and transportation. This ensures that the beneficiary enjoys a better quality of life while still retaining access to vital public benefits. Should there be remaining funds in the trust after the beneficiary passes away, these can be distributed to other family members or heirs, as predetermined by the trust’s creator.
It’s important to consult with a legal expert specializing in trusts and estates to ensure that any trust is properly established to meet the specific needs of your family and comply with all legal requirements. For cross-border families, it’s even more important, since different countries view trusts differently and tax them differently, too. Expert guidance is crucial to achieving the trust’s intended benefits for your loved ones. As financial advisors, we can’t offer legal advice, but we can guide families through complex decisions and facilitate discussions with legal professionals.
This couple’s goal was to create a plan that was fair, flexible, and in line with the family’s values and needs. This client’s story exemplifies the intricate interplay between financial planning and family dynamics, especially in a cross-border context.
Take the Next Step: Your Financial Peace of Mind Awaits
If you find yourself in a similar situation, with investments in the U.S. while residing in Israel, and facing complex family financial challenges, we may be able to help. As experienced financial planners, we can assist in preparing for discussions with legal experts and provide guidance on managing cross-border investments that are held in trusts, like disability trusts. Click here to schedule a free cross-border financial evaluation and start securing your family’s financial future today. This call will allow us to understand your situation and determine how we can help. Let us help you create a plan that brings peace of mind, fairness, and stability, and upholds your unique family values.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published April 23, 2024.