The Family Money Talk: What To Discuss and Why
As adults over 50, we can suffer from putting off the money talk in two ways – having the talk with our aging parents AND having the talk with our children, who are adults, for most of us in this age range.
We can help ourselves by remembering the frustrations some of us have had in dealing with aging parents, but not really knowing what assets our parents have or how to gain access when circumstances dictate. If it spurs action on your part, use that frustration to spur the money talk with your family.
There are many reasons to delay “the talk.” Among them:
• You are an effective procrastinator
• You are afraid for your children to know your assets (good news or bad)
• Boomers tend to see themselves as forever young
• You are disorganized and embarrassed to let your heirs see that (it is likely they already know)
• You believe the information on your assets might make your children less likely to take care of themselves
All of these reasons are valid, but all can be overcome. Here are some tips.
Make a “to-do” list and keep your money talk tasks in the must-do category, not just tagged onto the bottom of the list. Set a date and time with the family for the money talk. Nothing spurs action like a looming deadline.
The best time to make these plans is while your mind is still functioning at a high level. That means sooner rather than later. You can do everything right from a health standpoint, but age affects us at different rates and in unpredictable ways.
File your asset information (whether hard paper copies or digital versions) in a manner that someone could work through the files and find everything without you being there to answer questions.
This should include the legal documents everyone should have: a will, to spell out your wishes after death; durable power of attorney, designating someone you trust to make financial, tax, and legal decisions on your behalf if you lose your decision-making capacity; and an advanced health care directive. This consists of two documents: a “living will” which tells your doctor what kind of care you want to receive if you become incapacitated, and a “health care power of attorney” which names a person you authorize to make medical decisions on your behalf if you are unable to.
Figure out a way to grant access to your asset files when you consider it appropriate, often at death or when incapacitated (more on this later). If your files are physical and you don’t want the family to have access until death or incapacity, consider leaving keys or access codes with a lawyer or trustee, as long as your heirs know who has access. For digital files, consider one of the many digital password vaults on the market. Some have free versions, usually limited by how many passwords can be saved and whether the application can be used on multiple devices.
Your heirs also need to know how to contact the professionals you have used to handle your affairs, namely your lawyer, accountant, and financial advisor.
This is a good time to reflect on values and legacy. Explain to your heirs that they will become stewards of the assets they receive. You worked hard and accumulated something that could be passed on, and they share a familial responsibility as recipients.
Not Always Equal/Not a Democracy
There are family situations where inheritances are divided unequally, and for good reasons. In the case of children, one of them might have cost the family significantly more through behavior choices, for example. One child might have special needs that will require more assets, or a child might have special needs grandchildren that could use more. The key here is to make sure you have reasons and make them clear so that everyone knows the differences and the reasons.
You also have options to time your gifts and to encourage certain behaviors based on rewards. You could dole out assets over time as children reach certain ages. Or, you could make all or part of the funds available after college graduation, for example. Strategies such as these can be used to overcome any concerns that heirs will be less inclined to take care of themselves once they get a better handle on their likely inheritances. I recommend you seek legal advice on any of these options.
This is not a democracy. As the one giving away, it’s your decision. Still, explaining your reasons is key to a smooth inheritance and a minimum of rancor.
Together or Separate
If you have multiple heirs, should you have one big meeting or separate ones? One is quickest, obviously, and I would choose that approach unless there was a great reason to do otherwise. Meeting together fosters a sense of family. We’re all in this together.
Clear the Air
The gathering, or gatherings, can be more than a dry explanation of assets and who is getting what. Use it as another way to convey your values and legacy to family and other heirs. Also, it can be a time to clear the air of any lingering hurts that are out there.
While you are scheduling, expect and plan on a follow-up. As you and your heirs age, the circumstances probably will change. For example, if you died when your children were in their 30s, you might have assets set up in a trust with a heavy emphasis on asset protection for a longer-term. By the time they are 65 and ready to retire, that approach might not be the best.