Wealth Management Is a Family Affair
Make Sure All the Voices Are Heard in Your Planning Decisions
Regardless of how close a family may be, the idea of sharing personal financial details or future plans with your kids is often a tough hurdle for parents to get over. Letting kids know the size of your portfolio or your plans for passing assets after your death can create difficult conversations and maybe even affect a child’s work ethic or drive to better themselves.
However, there can be just as many risks in not involving kids in your financial affairs. And the concerns aren’t just emotional – leaving your kids in the dark about your affairs could put you at risk if you’re no longer able to manage your own finances. Incapacity can happen suddenly, so you may not have the luxury of waiting to involve them until it’s absolutely necessary.
What to Share and When
Sharing with your kids doesn’t necessarily mean sharing all your financial details. However, there are certainly benefits to at least giving them a sense of where you stand and your thoughts on how your finances should be handled.
First and foremost, it’s a way to make sure everyone knows what is expected of them. Studies have shown that even when families think they have good communication, they aren’t always on the same page. According to a 2016 study conducted by Fidelity, 72% of all parents expect one of their children to be responsible for the parents’ physical care when the time comes – but 40% of the children expected to fill these roles didn’t realize this was expected of them.
And the opposite can also be true – kids are expecting to have to care for their parents, when in reality the parents have already made other arrangements for that care. Mixed expectations like this can force both parents and children into making life-changing plans at a time when both sides are dealing with enough uncertainty.
Keeping Everyone in the Know
Involving your children is also a great way to make sure everyone knows who is counseling the parents on their finances and where any important papers are kept. Although roles have shifted over time, it’s not unusual for one parent to take responsibility for all the family finances, while the other has little to no involvement. The frightening upshot of this is that if that person suddenly dies or is incapacitated, no one else would have any idea what plans have been made. There have even been instances where the surviving family members didn’t even know who their financial advisor was.
By opening the door to these topics with your kids, it’s a chance for them to ask questions like, “Where do you keep your will?” and “Who do you rely on for financial advice?” These questions generally don’t come up naturally over Thanksgiving dinner.
For parents willing to take this even further, it’s also a way to make sure everyone’s voice is heard, which is particularly critical for things like estate planning. Maybe it’s extremely important for one child to inherit the lake house – while another one wants nothing to do with it.
These sorts of opinions can be crucial when you’re considering how your estate should be divided among your heirs. That doesn’t mean that everyone’s desires will be acted upon, of course. But just knowing that they were involved in the decision-making process will likely make the children more accepting of the results, even if they’re not in their favor.
How Your Financial Advisor Can Help
Finally, many of these topics are not easy for families to discuss. No one relishes bringing up funeral arrangements at family reunions, and no one wants to buttonhole granddad to ask who he has named for his medical power of attorney.
Bringing everyone together in front of a financial advisor clears the path for these awkward discussions. Everyone knows what they’re in that office for, which means that difficult topics are the course of the day and no questions are off-limits.
But that can only happen when parents are willing to open up and everyone is invited to participate. If you’d like to schedule such a meeting for your own family, see your Baird advisor for guidance.