White-collar types like me are supposed to be inclined toward golf, but as my teenage daughter says: "I don't really understand the appeal of a game where you're not allowed to tackle anyone."
My drive is more of a slap shot than a graceful swing, but on one particular day it was working for me. Early in my career I had been invited to an annual golf scramble, despite not having golfed more than once or twice in my life. Being cheap right down deep in my bone marrow, rather than rent a set of decent clubs, I scanned the second hand stores in town and put together a motley set of clubs for around $15 in total, including a dozen or so used balls.
After receiving a couple of encouraging compliments from the important client I was sharing the rounds with (no doubt in the spirit of chivalry), I started to feel a bit less awkward - perhaps even a little proud. I don't remember the lengths, but apparently my drives were relatively good for someone using an old three wood made of... wood - with a big gaping chip missing out of it on the right side.
At this point we teed off at a mid-length hole with an L-shaped fairway, where my friendly companion suggested a four iron to start with. My four had a leather grip, well past its prime and dry. I approached it more like Happy Gilmore than Arnold Palmer, and - hoping to impress my companion, swung with all the might of a wood-chopper working over a gnarly piece of birch.
The distance was impressive - of the club, not the ball. The club sailed gracefully through the air in a gorgeous arch some 75yards after slipping out of my hands at full thrust, and landed in the middle of a pond. Simultaneously the ball sliced right, and bonked off a tree, bouncing off to nowhere in particular.
"Don't worry," my gracious friend commented, "this game has humbled better men than you."
He handed me another club, one of his own, and motioned me to tee off again.
A golf club is not the only thing that might slip away from us in the midst of a mighty effort to press forward and hang on. In fact, we spend a lifetime accumulating resources to fund a comfortable retirement, and sometimes we succeed with a surplus. But the skills and aptitudes that build wealth might not be well matched to the task of passing it on successfully.
When it comes to your children, "affluenza" is a cheeky term sometimes used by people raising children in an environment where could give them a distorted sense of value and makes them less motivated to work hard to build their own financial resources. Most people who have built a relatively high level of wealth have done so through hard work, either as a business owner, executive or professional.
As parents wanting the best for our children, tooling them with the skills they need to be successful adults is a constant focus, and a solid financial education is a key part of every child's successful future. The best way to protect your children from affluenza is to prevent it in the first place or to "cure" it as early as possible.
Parents with above-average financial resources aren't able to say "No" with that old parental standby: "We can't afford it." But they still need to teach the lesson that we don't always get what we want. One solution is to sit down as a family and draw up a monthly or semi-annual budget that accommodates reasonable activities and purchases for everyone in the family.
When the kids invariably ask for something that's not part of the plan, you'll have an ironclad answer: "No, that's not in the budget. But maybe we can include it next time."
Your estate
Do you have surplus assets that you will definitely not need during retirement? Are you also planning on providing funds to your children or grandchildren in the future to help with things such as paying for education, purchasing their first home, starting a business or paying for their wedding? If so, then it probably does not make sense to continue exposing the income from these surplus assets to your high marginal tax rate. Instead, consider giving some of these surplus funds to family members through a trust.
There will be no attribution on any investment income earned on the gifted funds if the child is 18 or older and, if the trust is structured properly, no attribution on capital gains if the child is under 18. If you are concerned about direct gifts to your children, then lending funds and providing your children with only the income earned on these funds is another effective strategy as you can call the loan principal back any time.
This article does not constitute tax or legal advice, and readers should consult their own professionals before proceeding with a strategy.
Mark Ryan is an advisor with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at Mark.Ryan@rbc.com.
