Senior Wealth Planner

In this Wealth Planning Update:

  • Many parents hesitate to share financial and estate information with their adult children
  • There are, however, basic documents that your children should know how to locate, and at a minimum, they ought to know who is appointed to represent the estate
  • Sharing your plan for your later years can provide comfort as your children will know your wishes
  • Sharing your financial security, or lack of, allows your children to know what to expect
  • Sharing your estate plan helps your children plan for their own future

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Ask any parent—no matter the age of their children, their accomplishments, or the fact that they have started their own family—their child is still their child. For that reason there are sensitive and personal topics many parents haven’t discussed with them, specifically information about their finances, wishes for care as they age, and estate plans.

You may find estate planning a difficult subject to address, and you may find it equally as difficult to discuss with your children. You may not wish to burden them or find that talk of your medical and estate decisions is uncomfortable. Maybe you don’t feel comfortable sharing many details since you don’t know how the information will be interpreted. But for your wishes to be carried out, as well as for your children to be equipped with the right amount of knowledge to allow them to make decisions impacting their financial future, it is a good idea to broach these subjects with them. Regardless of whether you wish to divulge every detail, you should consider sharing certain basic financial and legal information with your adult children.

Basic Documents to Share

There are three documents that you should work with your legal professional to create no matter the status of your financial or family situation. Once in place, you can share who has been appointed to represent your estate and your interests in these documents and where they can be found. These documents are:

  • Durable power of attorney—authorizes whoever is appointed to act on an individual’s behalf for a wide range of financial matters. It can be effective immediately or upon incapacitation.
  • Living will—outlines your wishes regarding withholding or withdrawing life-prolonging procedures if you cannot speak for yourself.
  • Health care proxy, also known as a health care power of attorney—gives the person appointed as proxy the power to make healthcare decisions if the individual is unable to do so.

Topics to Discuss

  • The location of other important documents and the contact information for your medical and financial advisors—Spouses and partners may not be available or unable to help, so your children may be called on to act on your behalf. Accessing documents and knowing who your advisors are and how to contact them will be important to them.
  • Your retirement plan—If you have taken action to put financial measures in place to support you in the future, you can help ease stress by informing your children of the issues you have addressed. Retirement topics to cover include your retirement savings, long-term care insurance coverage you have purchased, or future plans to sell your home and live in an adult community.
  • Your financial standing—Your finances will likely impact your children. Their future financial health may be affected by whether you need to depend on them for assistance or you will be gifting, loaning, or leaving assets to them. If you anticipate that your retirement savings may fall short of the amount of money you will need to sustain your lifestyle, it may be difficult to think about talking to your children if you feel the conversation reflects weakness on your part. Adult children also need to plan for their future, so knowing what you expect to do for them and what you may need from them allows them to plan appropriately. Maybe they are counting on a loan from you to start a business or fund their children’s education. How do these expectations factor in to your wealth plan? Whatever your situation, it can be helpful for all when this information is shared to some degree.

The Impact of Your Estate

Although federal and state estate tax laws are based on taking care of the surviving spouse, many people want to leave their children an inheritance. What constitutes a thoughtful estate plan?

A good estate plan is attentive to the financial elements involved in transferring assets and the emotional elements the transfer entails. The emotional component is important because, although we may not like to admit it, money talks. It is important to ask yourself what you want the money to say to your children. When you are planning for the distribution of an estate, you should consider the potential strains on family harmony.

Similar to the importance of letting your children know about your finances, it is important to tell them about your estate plan so they can plan for their future more effectively. Communicating your estate plan can be done effectively without sharing how much you plan to leave to your children. It is most significant to share the goals behind your plan along with the structure (how assets will flow at your death). For example, if children are expecting to inherit the family business, it is important to know what provisions you have made, especially if some are active in the business and others are not. Perhaps you are planning to leave part of your estate to your second spouse or a charity. Whatever the situation, sharing this information can be beneficial to all parties.

Talking about financial matters and subjects dealing with one’s passing is difficult for all involved, but the knowledge and increased security that family members can gain by having these discussions will likely far outweigh the discomfort.