Written on March 15, 2013 – 5:00 am | by Jasmine Sweatman
We came across an interesting article on the Accounting Today website: http://www.accountingtoday.com/news/New-Affliction-Post-Traumatic-Gift-Disorder-65739-1.html. In his article, Lance Woodbury has coined a term for a “condition” many of us have probably seen in practice: “post-traumatic gift disorder” (or PTGD).
Mr. Woodbury uses this term to describe the circumstance in which parents (usually family business owners) have completed significant gifts during their lifetimes, and then have suffered from feelings of regret or uncertainty afterwards. PTGD “may be characterized by sleeplessness, feelings of regret, astonishment at legal and accounting fees, stacks of documents, lender questions, or concerns about multimillionaire kids’ spending habits.”
New terminology aside, this sort of regret is not difficult to understand, particularly when you consider that the gifts are usually made to avoid taxes, and not simply out of a generous desire to make a gift to one’s children. In the US context, the gifts are typically made to reduce estate taxes that would otherwise be incurred. While taxation may differ in Canada, Canadian reasons are also tax-driven. The gifts require establishing more complex ownership arrangements: new legal entities, agreements, transactions, new by-laws, trusts and dealings with lawyers, accountants, and other professionals. The process can serve to make clients feel confused and out of control, and to make the family business they have been so close to, seem out of their hands. Parents may also find that their children are not as grateful as they had expected, or that they seem indifferent to the gift.
So, how can advisors help prevent PTGD? The following suggestions, which are primarily intended for accountants, but are equally applicable to lawyers and other advisors, are highlighted:
- Encourage your clients to view estate planning as a process, not an event. Manage their expectations, ensuring they know they may need to revisit and change their plans as circumstances change;
- Education and communication between generations is key – an advisor should cultivate and promote this; and
- Encourage family meetings, which are valuable in keeping conversation alive
Lesson Learned: “The answer to [the symptoms of PTGD] – and the opportunity for you as a trusted advisor – lies not in any wonder drug. The opportunity is how you and your team consider the estate planning process and how you approach the conversation about your clients’ gifting strategy with their family members and business partners.”
Until next time,
Jasmine Sweatman/Bethany Anderson