#154 - Financial conversations with loved ones
When is it a good time to have a heart-to-heart conversation with your loved ones about finances? My response to that question usually goes something like this. “When is now a good time?” As a retired financial advisor, I have some strong opinions on this subject. I always encouraged my clients to have a financial conversation with their spouses, their parents, and with their adult children. This subject was painfully re-enforced with recent passing of my father.
These conversations are always easier said than done. In our society, it is generally taboo to talk about money! Yet, it is one of the major causes of divorce and the break-up of families when one or both parents pass away. To help eliminate some potential problems, here are a few of the types of conversations you should have.
- Household budget conversations with your spouse (or significant other)
- Age appropriate money conversations with children
- Estate planning conversations with your spouse (or significant other)
- Estate planning conversations with your parents
Household budget conversations
Household budget conversations with your spouse or significant other should happen regularly. The conversations should start with an annual planning meeting. Get your financial advisor involved to help you set and review your short, mid, and long-term financial goals. Next, a good rule of thumb is to have a budget conversation when each of you gets paid. This can be weekly, bi-weekly, but at the very least monthly. These conversations are to review what money is coming in, what money is going out, and working out unexpected or unplanned expenses.
Age appropriate money conversations with children
Age appropriate conversations with children will help you teach your children about money. They need to learn at an early age how to handle money responsibly. They need to understand where the family money comes from and that there is generally not an endless supply. There are traditionally two ways for younger children to learn good money management. The first is through an allowance. The other is for the child to earn money by doing chores around the house. I won’t get into any of the pros or cons of these methods right now because that would be a full blog post by itself. The younger your children are when they learn financial responsibility, the easier your life will be later on down the road.
Estate planning conversations with your spouse
Estate planning is rarely a conversation we want to have, yet it is very important for the preservation of any assets you have accumulated over the years. In the event of your death, where do your assets go? Do you have a beneficiary designation on your financial accounts or other title-able assets such as a house, car, boat, etc.? Do you have a will or trust? What about durable powers of attorney for finances or healthcare. This is where it is really important to get professional help from an attorney, financial advisor and even your CPA. The plans you make should be designed to help provide for the surviving spouse (and children) as efficiently and effectively as possible. Remember, if you don’t implement an estate plan, your state of residence has a plan for you…and it probably won’t provide for your loved ones as you would wish!
Estate planning conversations with your parents
Estate planning conversation with our parents are some of the most difficult to have. We never want to think that they are going to leave us. The reality is…they will. There are so many pitfalls here. I was fortunate that my father shared with my sister and me that he had executed a will, trust, durable powers of attorney for both finances and health care. It appeared that he had everything taken care of. I assumed that his attorney had helped him put all of his title-able assets into the trust. He didn’t! After my dad passed away, we discovered a significant portion of his estate will have to be probated because some assets were not titled to the trust or didn’t have beneficiaries attached to them. As our parents age, it is even more important to make sure that we help them get everything in order. You see, when they pass away, it is left to us, the family, to take care what’s left. Without proper instruction from our parents, families break apart do to grief and greed. It is always difficult to say good-bye to a parent. Help your parents make it easier by helping them make sure they have everything in order. I guarantee you that if your parents left you a mess to clean up, you will think twice about ignoring your own estate planning because you won’t want your children to have to deal with the same problems you did with your parents.
Please make sure you don’t wait to have these conversations until you feel comfortable. If you wait or procrastinate, you may never get the chance to have them.