You
probably haven't talked to your grown kids about where you bank, how much
you've saved, and other key details. Here's why it's urgent
by Dan Kadlec | June 4, 2019
Is this
the Birds and the Bees Talk 2.0? More than half of adult children say
conversations with their parents about family money make them uncomfortable.
Before my dad went in
for routine surgery 11 years ago, as a precaution he told us he had everything
we needed to know written down on a piece of paper in the top drawer of his
home desk. Yeah, yeah, my two siblings and I nodded. See you in the morning.
Weeks later, after
complications had left him in a coma and he passed away without another word at
age 79, we were thankful for his prudence. Dad had left a note with all of his
financial account numbers, piles of meticulously organized sales receipts and
warranty documents, an inventory of his safe deposit box, and specific
instructions for things like who he wanted to have his gold watch, money clip,
coin collection, and diamond ring.
It was a great
relief, while we were grieving, not to have to worry about hunting down
critical info like where he banked and invested or second guessing his wishes
about who among us got the possessions that meant the most to him.
So, have my wife and
I put together a similar record for our three young adult kids, just in case?
Well…
Don’t be a classic
avoider
Death is not fun to
contemplate, especially if you are in your 50s or 60s, feeling good, and
looking forward to a decade or two of scaling back work and enjoying life more.
Thinking about the
physical and financial challenges of older age is no walk in the park either.
Some 80 million adults in the U.S. are classified as conversation avoiders when
it comes to end-of-life issues, according to research out of Marist
College.
Seventy
percent of family money conversations occur only after a health crisis or other
emergency.
Home
Instead Senior Care Network
More than half of
adult children say conversations with their parents about family money make
them uncomfortable, the Home Instead Senior Care Network found. That same research shows that
70% of family money conversations occur only after a health crisis or other
emergency.
At this age, many of
us know first-hand how difficult it can be to unravel an ailing or deceased
parent’s finances and legacy plans. Digging up account numbers, passwords, and
directives is a time-consuming chore that could be so much easier if everyone
was, well, more like my Dad.
When there’s a will…
Yet few of us have
written anything down or had the family money talk with our kids. Incredibly,
nearly half of American adults aged 50 to 64 don’t have a will, according to Gallup.
And few have made
critical expectations about family finances clear. For instance, seven in 10
parents age 55 and older expect one of their offspring will help them manage
their investments in retirement, a Fidelity study found,
but 36% of the adult children identified for the role don’t know Mom and Dad
have mentally assigned them the task.
“Being open and
willing to share your finances with grown children is one of the biggest issues
I have with my clients,” says John Cooper, a financial planner at Greenwood
Capital in Greenwood, S.C. “They are robbing themselves of the opportunity to
talk about their values and why they have arranged things a certain way.”
Start with the basics
So, how much should
your kids know about your money? If you are healthy and possibly still working,
and the kids are just launching their careers, don’t forage too deep into the
weeds.
“Only a quarter of
young adults are financially literate,” says Liz Crystal, a financial planner
with the LC Group in Greenbrook, N.J. “You don’t want to overwhelm them.”
“Only
a quarter of young adults are financially literate. You don’t want to overwhelm
them.”
Liz
Crystal, financial planner, LC Group, Greenbrook, N.J.
Your grown kids
should have a basic understanding of what they can expect as you age, and then
pass away, she says. Have you saved enough to see you comfortably through
retirement? Do you have long-term care insurance that will help cover the bills
if you’re no longer physically or mentally able to take care of yourself?
If so, let them know
now that these are not things they will need to worry about as you grow older.
If not, hard as it may be to admit to your children, they need to know that
too.
In the Fidelity
study, 72% of parents were counting on one of their offspring to be their
long-term caregiver if needed, but 40% of the sons and daughters identified
didn’t know this was expected of them.
Let them know their
piece of the pie
If you’ve done well
financially, and your kids stand to inherit money or assets, they should know
that too. After all, it will be theirs one day.
But keep it vague,
says Brett Anderson, a financial planner with St. Croix Advisors in Hudson,
Wisc. Knowing about an inheritance can serve as a disincentive for a young
person to pursue their own financial security. “How much you say should depend
on their maturity and their own financial situation,” he says.
Plus, what you
ultimately leave behind may be different than what you currently plan. Your
portfolio may take a hit. Your health may fail and require costly medical care.
You may change your ideas about how you want to live and whether you want to
leave more to charity.
“Why
should [your children] stress about expenses you are going to pay for?”
John
Cooper, financial planner, Greenwood Capital, Greenwood, S.C.
It would be an
unnecessary hardship on your kids, emotionally and financially, if you verbally
commit to one thing, then later take it back.
Where you should make
your intentions clear now, though: if you can afford and plan to cover any
near-term bills your adult children may face, such as those for a wedding, grad
school, tuition for a grandchild, or a down payment on a house.
“Why should they
stress about expenses you are going to pay for?” says Cooper. Not knowing
certain costs are covered could lead them to save less in their 401(k) and miss
out on the full company match, he notes.
Keep talking the talk
Think of all this as
the beginning of a years-long conversation—not a one and done, Cooper adds.
The idea is to break
the ice now so that money talk will flow more naturally over time. That will
make it easier to explore what your kids want and to explain your wishes.
“It is so important
for parents in their 50s and 60s and their kids to be on the same page,” says
Tony Drake, CEO of the financial planning firm Drake & Associates in
Waukesha, Wisc. “Johnny may really want the vacation home while Suzie would
rather have the cash to buy her own home. You won’t know unless you talk about
it.”
Job
No. 1: Get organized. Make a record of your bank and investment accounts
(including the last four digits of the account numbers), a list of assets, any
debts and insurance, your pension or other income, and recurring expenses.
The record should
also have names and contact information for any professional advisers in your
life—accountant, financial planner, lawyer. It should list any powers of
attorney, your estate’s executor, any healthcare proxies, living wills, and
wills.
You can find
templates to follow online, such as this one put together by Vanguard. “The kids
don’t need to read it,” Crystal says. “They just need to know where to find
it.”
Consider the 40-70
rule
Your children’s
fuller understanding of your financial affairs can wait until they’re old
enough or mature enough to handle the details—or you’re getting up there in
years or develop health issues.
Home Instead uses a
“40-70” rule. By the time you are 70, or your oldest child is 40, your finances
should be fully disclosed and discussed with the family, and the kids should have
met your financial adviser if you have one.
“Call a family
meeting and verbalize your will,” says Anderson. “Don’t keep secrets. The more
clarity the easier the transition for your survivors.”
I’m not there yet
with my three twentysomethings. They have a general idea of what to expect—they
know we have saved enough to never be a financial burden to them but that the
lake cabin may have to be sold if one of them can’t buy out the others—and
that is where I will leave it for the time being.
The detailed discussion
will have to wait until I’ve written my novel and learned to paint.
But I’ve begun to
update a record of family assets. Should anything unexpected happen, it will
all be written down on a piece of paper in the top drawer of my home desk.
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