When and how to talk to your adult children about your finances
Dear Clients and Friends,
If you’re like most people, you don’t like to contemplate your own mortality. After all, you’re enjoying life and if you’re in your 50s, 60s or even 70s, that’s not really considered very old these days.
That feeling is why so many older Americans avoid talking to their adult kids about end-of-life issues such as who’s going to make important medical decisions should they no longer be able to decide for themselves and, especially, their personal finances. It’s also why many younger Americans avoid approaching aging parents about these issues.
In fact, according to a 2014 study from Marist College, approximately 80 million Americans are avoiding these conversations with aging parents. When they do occur, it’s usually only after a health crisis.
Don’t be part of that statistic. If you are an aging parent or a younger adult with aging parents, it’s important to have these conversations as soon as possible. That’s because circumstances can change in a hurry, and when it’s left to the kids to figure out how to unwind complicated finances, bickering and resentment can result. Sometimes family members in these situations can even end up in court.
So what should you be talking about? First, older parents need to give their kids a basic understanding of where they stand financially. For example, kids should know whether their parents have adequate retirement savings. It’s not fair for adult kids to be blindsided with the knowledge that they’re going to need to support their parents at some point.
Additionally, what if one or both parents require long-term care, either from a home health aide, in an assisted living facility or in a nursing home? It’s important for your kids to know if you’re insured or if you’re going to have to cut down your estate to qualify for Medicaid, or even if they are going to end up footing the bill.
Unfortunately, it’s common for there to be a disconnect between parents’ and kids’ understanding of what’s going to happen. A study from Fidelity Investments shows that nearly 75 percent of parents expect one of their kids to take care of them when they can’t live independently, but only 40 percent of children are aware of this.
It’s also important to discuss with adult kids what, if anything, you plan to cover for them. Without being too specific, you can let them know if you’re in a position to help with your grandkids’ education, the purchase of a home, a wedding or a host of other things that your kids would otherwise need to cover for themselves. This knowledge may affect their own investment and savings decisions.
It’s even more critical to share with them how to access all your bank and investment accounts should anything happen to you and to provide a list of your debts, assets, insurance policies, retirement plans and expenses.
You also want to provide contact info for anyone who helps you in these matters, whether an attorney or a financial planner. And you absolutely want to let them know the location of any wills, trusts, healthcare proxies (instructions on who can make medical decisions on your behalf), powers of attorney (who can act legally on your behalf) and the like. Better yet, create a document with all of this information and keep it in a safe place they know about.
It can be very difficult for your survivors to untangle these things after you’re gone if you haven’t provided this information. It also can cause misunderstandings and stress in what’s already a very difficult time.
Finally, it’s a good idea, once your children are old enough to handle the conversation, to share the details of your will. Talk to all your kids at the same time, especially if you’re not distributing assets equally. Although it may cause some hurt feelings, you can reduce the tension by explaining why you made the decisions you made.
It’s equally important to let them know who might be granted power of attorney or named health care proxy and why. This can forestall costly legal battles between them over your estate and over important decisions later.
This is a good start, there are more things to consider and we invite you to call us for a free phone evaluation of any other family law or estate planning concerns you may have.