Don’t wait for tragedy to strike before opening the door to difficult conversations.
Rebekah Barsch is executive officer and vice president of Planning and Sales at Northwestern Mutual.
Do you talk about your financial plan with your adult children? If you don’t, you should—for their sake and for yours. After all, you probably have plans for your money. And to the extent that those plans involve (or will impact) your kids, they should be aware of your wishes. Plus, your adult kids may end up managing your finances someday, so talking about your financial situation; now will help them be prepared for what may lie ahead.
Unfortunately, in the financial planning business we see far too many parents avoid talking about money. In many families, the topic is simply taboo. But when the kids are grown, it’s in everybody’s best interest to have open and honest conversations about your financial situation and it’s often up to you, the parent, to initiate the discussion.
To make having the talk a little less stressful and a lot more valuable for everyone involved, start by planning to tackle these three topics:
1. Your assets. Pull together a list of your assets—personal property, bank accounts, investment accounts and life insurance policies, along with account numbers and contact information. And if you access any of the accounts online, also list the website addresses, user names and passwords for each account. Then, when you have “the talk” with your kids, let them know where they can find the list should something happen to you so they don’t have to go on a scavenger hunt when the time comes. Having a complete list also ensures that the kids won’t overlook any assets you meant for them to inherit. At any given time, federal and state agencies are holding tens of billions in unclaimed property—from forgotten bank accounts, insurance payments, pensions, tax refunds and safe deposit boxes—just waiting to be claimed.
2. Your estate plan. If you’ve had a will or trust and powers of attorney drafted, you’ve obviously given some thought to your end-of-life wishes. Share that information with the kids while you’re alive and healthy so there won’t be any surprises or hurt feelings down the road. You don’t necessarily have to go through who gets what after you’re gone, but let them know whom you’ve named as power of attorney for health care and for finances and who will be the executor of your will or trustee of the trust. Tell your kids where to find a copy of your estate plan, and provide them with the name and contact information for your estate planning attorney. You may also want to let them know if you have a plan for long-term care or that you’ve preplanned your funeral arrangements.
3. Your plan for retirement. Your vision for retirement may not necessarily line up with the expectations of your adult kids, so let them in on your plans. For example, if one of your goals is to visit all of the U.S. national parks during the first few years of retirement, you probably won’t be around much to care for grandchildren. So if your kids were counting on your help, you’ll want to reset their expectations. Or, if you’re thinking about downsizing or moving to a warmer climate at some point, you may also want to tackle the often emotional topic of selling the family home. By talking about the possibility now, the kids won’t feel blindsided later.
Of course, if you’re just not comfortable talking about money, mustering up the courage (or finding the right time) to talk about these topics with your kids might be the most difficult part of the process. Here are a few tips that may make having family conversations about money easier.
Have the talk soon. Don’t wait for tragedy to strike before opening the door to difficult conversations.Have the talk at a happy time when everyone’s healthy.
Approach the conversation with sensitivity. Your kids may be reluctant participants. They, too, may be uncomfortable talking about money. And any discussion about your estate plan will force them to acknowledge the inevitability of your death, which they may also want to avoid. So think about their mindset when setting the tone of the conversation.
Take small steps. There’s no need to cover all the ground in one conversation. Take your time. It’ll give you and your kids an opportunity to get more comfortable talking about these important issues.
Involve your financial advisor. Consider introducing your adult kids to your financial advisor. This can be helpful in two ways. First, your financial advisor can help you communicate the value of having transparent family conversations about money. And second, by establishing a relationship between your advisor and your kids, you’ll be paving the way for a smoother transition when the time comes since your kids will be reaching out to someone they know.
Opening the door to family conversations about money also gives you an opportunity to share lessons learned. For example, my husband and I learned the hard way about owning a second property. It’s expensive, and we hardly ever get to spend time there because we’re all so busy. I want my kids to understand why that may not have been the best financial move we ever made. And as long as we (and they) feel comfortable talking about money, we can talk about the things we wish we’d have done differently. Hopefully, they’ll feel comfortable doing the same with their kids one day.