by Michael W. K. Yee, Financial Advisor and Certified Financial Planner
According to the Family Wealth Checkup study by Ameriprise Financial, there’s a correlation between financial confidence and communication. While many families are discussing financial issues, they tend to shy away from topics like inheritance and estate planning, leaving some with unrealistic expectations. But family conversations about finances lay the foundation for a more secure financial future for the people closest to you.
Tips for Family Discussions About Finances
Don’t wait for a tragedy to bring up the topic. Nine in 10 adult children say a life-altering event triggered a financial talk with their parents. It’s best to have these conversations when all the important players in your estate plan can participate and communicate. With time on your side, you can cover topics thoroughly and have leeway to get the proper documents in place.
Families who have opened this dialogue report that it went much smoother than anticipated — conversations were straightforward and relaxed as opposed to awkward or difficult.
Schedule the conversation; make it a priority. Rather than just hope a conversation will happen, let each family member know ahead of time that you want to talk. Complex estates may require multiple discussions, so schedule a date to continue as needed. After your initial discussion, keep family members up-to-date about changes.
Share your agenda ahead of time. Consider starting the conversation by sharing your financial goals and values. Other topics on the agenda may include managing current finances, healthcare costs and legacy planning.
Manage expectations. It’s important to disclose enough detail so that your family can set appropriate expectations. If part of your legacy plan includes leaving an inheritance, consider letting your family know whether it’s an amount large enough to help fund your grandchildren’s education or closer to a down payment on a car. Only 21 percent of parents have told their kids how much they can expect to receive.
Create or update your estate plan. Pair your conversations with a comprehensive estate plan to prevent rifts that can happen when financial wishes are not clearly documented. Your estate encompasses anything you own. Creating a plan that determines what happens to these assets and accounts — no matter the size of your estate.
If you already have a plan in place, update it to mirror the blueprint you’ve shared with your family and consider providing instructions in a healthcare directive in the event that you cannot act on your own behalf in the future.
Disclose locations of important documents. Prevent headaches that can slow down the settlement of your estate by providing instructions —
where you’ve stored the safety deposit key, bank accounts, stock certificates and digital assets, etc. Ensure that your family has contact information of the professionals (lawyer, estate planner, tax, financial advisor) who are helping you plan.
Work with a financial professional. If you experience conflict in your family discussions or want some help navigating difficult topics, consider working with a neutral third party, such as a financial advisor. A financial professional can help family members understand your collective financial picture and can facilitate the transition of wealth from one generation to the next.
Ongoing dialogue about estate topics with family members can bring you closer together and pave the way for a smooth transfer of wealth —
when the day comes.