Have you had "THE TALK" with your parents? Nope, not the birds and the bees... I am not about to help you with that talk. Our daughter is asking enough questions on that. I am talking about the discussion regarding your parents' finances. Both of these talks can be awkward for many. Well, if you haven't yet had the money talk, you are not alone. The majority of adult children have little to no idea of their parent's true financial situation. Like the sex talk, parents' sharing their financial situation with their adult children is often a conversation avoided.
Why is that?
Here are some common reasons why parents don't talk with their adult children about money...
Do any of these apply to your family?
1.) "We have never talked about money"
When kids are young it is thought to be a good idea to avoid discussing money so the child doesn't worry and feels secure. While good intentioned, it doesn't help that child become financially wise themselves and never discussing money can make very important future discussions awkward to approach for both parent and kid alike.
2.) "It's none of their business"
This mentality sometimes comes from embarrassment of past mistakes, the idea that I don't want my kids to worry about me now (similar to when kids were young) or the parent simply feels it is a private matter, essentially that "it is none of their business." Parents may have given off an image of wealth or success and are reluctant to share the reality that things are not as good as they look. And for some parents, if wealthy, they may feel their kids may try to take advantage of them.
3.) "I don't want to talk about my death"
Mortality is not a fun discussion for the parent or the child. Obviously, it can stir many emotions- but like taxes, death is certain. Everyone has specific desires and requests in regards to their estate, whatever the size and more importantly, their legacy. Often discussing money is just the initial conversation that leads to great discussions on deeper family matters. How does a parent want to be remembered? Are their specific belongings that they want to go to a particular child or family member? Is there a church or charity that they want to gift money to? Even discussions on how a funeral service should be constructed. The list goes on and on.
4.) "I am afraid it will change their motivation"
This seems like a reasonable excuse but the truth is, by the time a parent is in their retirement years and their kids are correspondingly in their late 30s or 40s+... if that child is not already motivated in their career and to provide for their family, little is likely going to change in their attitude if they find out the parents are going to leave them a "pile of money." They will continue to be motivated. In fact, if a parent shares that things aren't great for them and share the things the wish they would have done differently... financially smart kids will probably get wiser and those children that are not motivated may actually get stirred to improve their own situation (especially knowing not to expect a large inheritance).
Breaking the Ice
If you find yourself in this situation as a parent who hasn't talked to your adult children or as the child trying to consider how to bridge this discussion, here are some tips. The idea is to just get the conversation started. It typically continues once the ice is broken.
Bring the topic up from your own perspective.
Start with your personal situation as the bridge. Being vulnerable is always a good way to encourage others to open up. "Dad (or Mom) recently I (we) have been making some plans on our estate (will/trust) and it made me curious about your desired plans?"
Ask for whom to reach out to.
Often the most honest and straightforward approach works best. Simply ask, "Mom, Dad who should I call if something happens to you suddenly" or "where are your documents that I should know about?" Let your parent know you want to be ready to help if they need somebody to step in for them to pay bills or talk to their doctor. This is where a power or attorney (POA) is a critical legal document.
Use a possession known to the whole family as a concern.
This can be a tricky option but effective in opening the door to conversations because everyone will know it needs to be addressed. "I am worried that it's not clear what you want us to do with dad's autograph collection (the vacation home, mom's jewelry, etc) if something were to happen to you. I want to make sure that your wishes are fulfilled and there is no possible confusion among my siblings as to what to do." Pick an item that is important to them to discuss or a decision that is important such as funeral arrangements, burial, etc.
Use your financial advisor as the impetus for the discussion.
Financial planning is my passion and I am more than willing to be the "scapegoat" to help a family discuss such important matters. "Our advisor suggested we find out how we can assist you with your plans. He wants us to know your expectations and be prepared to help you." It is common that children are named as a trustee or executor of an estate. Sometimes they don't even know it until a parent passes or is incapacitated and needs them to step in to assist. Talk about shock and being unprepared to help at a tough time, while dealing with the stress and emotions of a death or illness of a parent.
The REALITY like it or not
The reality is whether you are comfortable talking about money or not, money is an important part of everyone's life. Yes, for some parents their financial situation can be a taboo topic and a personal matter. But it cannot be ignored! If it is disregarded, it will likely cause larger and more complex problems later in life and especially upon a parent's death. Most parents when made aware of possible issues would rather not leave a mess for their kids to figure out. Talking sooner than later will open up communication, help children know how to assist their parents, get parents desired plans in place legally and set their children's expectations.
We regularly encourage and assist our clients in starting the conversation about family finances. This is what comprehensive financial planning involves. The advisor you use should be thinking in these terms to be truly effective for your family's financial life plan. If you need some additional ideas or help, please feel free to reach out to me.
Luke Fields, CFP®