The baby boomer generation is continuing to settle into their retirement years, and the Gen Xers are fast on their heels. Many members of both generations are taking the right steps towards securing their financial futures. But there’s one part of the equation that many are missing — not including their adult children in the discussion.
Adult children need to be part of financial planning discussions
If your children are an important part of your life, they should have a seat at the table and be able to provide input. After all, they are the future of your family, and at some point in the future, they may have to make decisions about your health and welfare.
Families talk about these financial matters in vastly different ways. Some are very open about the realities of their financial situations. Some only discuss it when they need to. Others consider talking about money taboo.
The process of talking with the up and coming generation about life’s realities may not be easy or comfortable or may seem premature; these feelings are normal for parents of any generation. But there are reasons to have “the talk” sooner rather than later. It’s not about dwelling on your mortality. It’s about making sure your children understand your wishes and values, that your legacy is preserved, and your family is prepared.
Many parents may be thinking, “I’m the parent. They are my children.” As a parent, you’ve always been protective of your children. You may think that shielding them from the delicate topic of estate and health care planning is an extension of that protection, but the opposite is true.
They’re not kids anymore and, like it or not, you may not be as capable in the future as you are today. Your children understand more about investing and financial planning than you think. Today, they can hear what you really want, and what you’ve put in place. Tomorrow, you may not have that chance. You need to provide your grown children with the clarity that will comfort them during what surely will be an emotional time in the future when you become incapacitated or pass away.
Transparency is key
When a crisis strikes, your children may have to locate estate documents, investable assets, insurance policies and other documents — all while grieving or dealing with a health situation at hand. If they’re already aware of your intentions, and know where to find your essential documents, they will be better prepared and less overwhelmed. Essential documents include (among others):
• Personal documents — Social Security cards, birth certificates, passports, drivers’ licenses, marriage licenses, divorce papers, Power of Attorney and health care directives.
• Financial records — Bank account details, investment accounts, pension plan info, credit card info, loan docs, tax returns, estate planning docs, wills, and safe-deposit box keys.
• Property records — Deeds, car titles and registrations and warranties.
• Insurance information — Life insurance policies, health insurance cards and policies, auto/boat insurance coverages, homeowners’ policies and long-term care policies.
• Family and medical documents — Adoption or custody papers, family and medical history records.
Be sure you create a secure document that leaves instructions and includes usernames and passwords to allow your designees to access your bank, phone, student loan, and other financial accounts (as well as how to get into your laptops and other devices, social-media accounts and email).
Tips for starting the conversation
The most important advice we can offer is, “Don’t get caught off guard.” Start planning early. If you or your spouse become mentally incapacitated and can’t make informed decisions, your children will need to step in and make decisions. As you think about ways to initiate these family conversations, it’s often more productive to break down big topics into more manageable pieces. For examples:
• What will your living situation look like as you get older? Do you expect to age in place, or move to assisted living or a co-housing situation?
• What are your health care wishes? Before creating a written health care directive, be sure that your children understand your medical care philosophy. For instance, how do you feel about the possibility of life support, experimental treatments, or wanting to forego medical intervention?
• Overview of your finances. You don’t need to be too specific about the numbers, but your children deserve to know whether you own life insurance, a 401(k) or IRA or other significant assets. If your house is your primary asset, they need to know your intentions if you or your spouse needs to move for health reasons. What happens to the house after one spouse dies, or after both parents are gone? In a blended family, are there different expectations about dividing up the assets for biological kids vs. stepchildren?
• Legacy and values. Beyond your financial situation, what values, traditions or causes do you wish to see your children continue after you’re gone?
• Estate planning details. Organize financial and legal documents — and tell your children about them, and where to locate them. If your children will inherit different amounts or types of assets, make sure they understand your reasoning while you’re alive. It will help avoid future confusion or hurt. Review your estate plan every few years to make sure it aligns with your wishes and the right people are named beneficiaries.
When initiating difficult conversations about end-of-life planning, you should anticipate that arguments and emotional concerns may surface. This can be especially true if you have multiple children. Even solid sibling relationships can turn when emotions run hot.
This isn’t to say that all discussions with the next generation will be entirely negative — indeed, they can be among the most loving and life-affirming interchanges you will ever have with your children and grandchildren. You should encourage them to speak up and ask questions — especially about what they’ve wondered about but never found time to ask.
As you focus on reinforcing the family values that matter to you, think of ways to document your most cherished life experiences, including childhood stories, what your parents (their grandparents) were like and earliest memories. Don’t be reticent about sharing what you are most proud of/biggest regrets. Imparting that valuable wisdom preserves your hopes and dreams for future generations.
And don’t be surprised if your children initiate “the talk.” Consider this a relief, and go with it. But also, be prepared.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.
