Family Money Talk: The Key to a Strong Financial Plan
Is something missing from your family’s financial plan?
Maybe you've dotted all the "I's" and crossed all the "T's" when it comes to your finances. But if you haven’t had a frank conversation with family members about your financial plans and final wishes, you may leave them with questions none of you ever anticipated.
In truth, most of us would rather avoid talking to our families about aging, end-of-life care, inheritance and estate planning—not to mention admitting that the time may be coming to make these decisions.
The money talk is one of the best and most practical gifts a family can share, and it’s crucial to ensuring your plans will be carried out as you’ve intended.
Why Families Should (but Don't) Share Their Financial Plans
Inheritance and Estate Planning Is…Uncomfortable
The reasons aging parents and their adult children avoid financial discussions likely mirror each other. You might be surprised how similar your hesitation and discomfort might be.
FOR AGING PARENTS
"It's my decision, and my family doesn't want (or need) this information."
"It's not a pleasant topic. I wouldn't know how to start."
"I'm sure I've taken care of everything. It's none of my children's business."
FOR ADULT CHILDREN
"I'm sure my parents have a plan and specific reasons for their decisions.”
"I really don't want to think about my parents' mortality."
"It seems greedy to ask about their money now, even if I do have questions."
Reframe the Discussion: Family Estate Planning Is a Gift
Rather than looking at these conversations with dread, think of the process as an act of love and generosity. Having critical conversations now can prepare your family for what's to come, which can help reduce anxiety during a time of crisis or grief.
Transferring money from one generation to another isn't just for wealthy families, either. It's important for every family to understand wishes, expectations and plans to keep the family's legacy—and relationships—intact.
Tell Your Family What You Want
Set a Date: Organize a Family Meeting
You and your family can find countless reasons to avoid sitting down to talk. Everyone's busy. It's hard to get everyone in the same place. It'll ruin Thanksgiving. It's unsettling to think about a loved one’s illness and death.
But coming together at a specified time—ideally outside of regular family gatherings or holidays—gives everyone a chance to be prepared. Family members can bring questions, concerns and requests, and hopefully avoid making decisions during emotional times.
Minimize surprises. Your family will know your wishes and expectations.
Reduce confusion. Family members will learn what they'll need and where to find important documents.
Decrease disagreements. When everyone has the same information, you can reduce the likelihood that family members find themselves at odds.
70% of family wealth may disappear by the second generation, and 90% by the third.*
Stay on Script: Tips for Guiding the Conversation
Once you get everyone in the room, here's how to stick to your agenda.
State Your Purpose
Tell your family that you're ready to discuss important matters related to your finances, estate plan, medical decisions and other final wishes that will affect the whole family.
Share Your Plans
Explain your financial, estate and medical decisions and how you came to those conclusions. You could share experiences of other family members or friends.
Review Documents and Roles
Hand out and review important financial, estate and medical documents. Identify which people (and if appropriate, why) you've chosen to carry out your wishes. Explain each role—executor, trustee, power of attorney, health care agents, etc.—and provide all the paperwork required.
Note: You should also consider the dynamics of your family; you may find that you need a neutral party (an estate planning attorney, doctor or financial advisor) to contribute to the discussion.
Ask for Commitment
Ask that the family commit to supporting and carrying out your wishes.
This process may seem overly formal, but each step is important. Remember, if something happens to you, this meeting can provide all the information your family needs to make decisions.
Still Planning? What to Consider
Choose the Right People to Carry Out Your Wishes
As you prepare for your family's financial discussion, it's time to finalize your "personnel" decisions. You'll need to make important choices about who will see your plans through. You are trusting them to protect your wealth, yourself and your loved ones.
Appoint an Executor/Trustee
This person represents your estate and ensures it's managed properly. If there's no executor, the process of distributing assets and going through probate could be longer and messier—a stress that your family and beneficiaries don't need.
Appoint a Financial Power of Attorney (POA)
The POA handles your financial duties if you're not able to do so. If you don't name your own POA, the process to name one on your behalf can be time-consuming and create family conflict.
Appoint a Health Care Surrogate/Agent
This person makes crucial medical decisions for you in the event you can't. Without this appointment, your loved ones will weigh in on your medical care, and you may not have any say. It's not uncommon for big differences of opinion to arise, especially when it comes to critical end-of-life choices.
Get Your Paperwork in Order
Has your family changed or expanded? Have you opened/closed accounts over the years? Are your finances more complicated than they once were? You may want to talk to an estate planning attorney or financial advisor to ensure the following documents are up-to-date and reflect your current wishes:
Will and/or trust documentation
Financial power of attorney appointment
Beneficiary and transfer on death (T.O.D.) designations for financial accounts and property
Health care directive or proxy
Want to know more about the ins and outs of estate planning? Read Plan Your Legacy at Any Age.
Stay in Control of Your Family's Finances
The lack of a solid plan could result in stress and extra work for your family.
But at worst, an incomplete plan could result in the courts controlling how your assets are divided, your beneficiaries losing their inheritance to creditors or a judge deciding who takes care of minor children.
A family financial plan doesn't have to be a burden. In fact, it may be the best way to protect your loved ones and ensure your legacy lives on.
Money.com. 70% of Rich Families Lose Their Wealth by the Second Generation by Chris Taylor / Reuters, June 2015.
This information is for educational purposes only and is not intended as estate planning advice. Please consult an estate planner or attorney for advice regarding your situation.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.