This simple solution will help families sort out finances as parents grow older
Posted August 4, 2016
When Shira Boss was little, her family — a single dad and his three daughters — had a meeting every Sunday to go over their calendars and deal with other issues. It's a habit that changed but didn't die just because the children grew up and moved to different states. Now, the family meeting is an annual event.
"On that agenda we always discuss updates to estate plans and other financial affairs," said Boss, of New York City. "Anyone with an issue raises it. Everything is in the open. My sister is the secretary and keeps minutes from all past meetings."
That kind of forthright discussion is not necessarily the norm as parents age and children become adults who may one day be called on to take some responsibility for them. A recent Fidelity Investments Family and Finance Study found some major disconnects between parents and their adult children when it comes to retirement preparedness, elder care and estate planning.
In the survey, 43 percent of parents said they had not discussed in-depth their plans or feelings about long-term care and elder care. An additional one-fourth hadn't discussed it at all. That's a major stressor for their children: 72 percent said their parents should be addressing that. And while 69 percent of parents think they've talked about their will and estate planning with their kids, more than half of the adult children surveyed say those conversations have not occurred.
The silence is somewhat deafening as families put off important conversations, said John Sweeney, executive vice president at Fidelity.
"We've been taught throughout our lives, 'don't talk about money, don't talk about what you make, don't talk about what you have.' So it's no surprise that aging parents have a difficult time talking about their financial readiness and retirement preparedness with their children," he said. "When you add in other complexities — my health is declining, I may need additional help — it's a challenging conversation to initiate with anyone."
The good news, for parents, is they underestimate how willing their adult children will be to help them out. While 93 percent of parents think it wold be "unacceptable" to depend on their children for financial support, just 30 percent of the adult kids feel that way, the survey found.
Out of sync
Among the disconnects the survey found between parents and their adult children:
• Ninety-two percent of parents have decided which one of their children will serve as an estate executor, but more than a fourth of those designated children do not know it.
• Similarly, 72 percent of parents expect one of their children to take on long-term caregiving if it's needed, but 40 percent of those adult children who are expected to step up don't know it.
• In terms of money management, 69 percent of parents expect one of their children will help manage their investments and retirement, but more than one-third of those adult children who have been designated do not know it.
Those are conversations that need to take place, Sweeney said, noting that the eldest daughter is often expected to fill the caregiver role, whether she knows it or not. Adult children should ask parents about their expectations. And oldest daughters should definitely initiate the conversation, he said, because there's a good chance the parents expect her to step up and provide care.
Shattering the silence
Parents should talk to their kids and explain what the children will find when estate-planning documents are completed. When one dies, it's too late to explain why one child received more money than another or was trusted to manage things — even if there was a perfectly good reason. Sweeney said parents should not leave their children guessing but should spell it out in advance. Otherwise, the children may live on with hard feelings about each other.
One of the questions Sweeney hears a lot is "Is there a dollar number?" He said the number is different for everyone. "While you're working, burn less than you earn. … But everyone's situation is different."
The goal is to have an income stream for life. "People need to figure out how to withdraw savings in a way that lets the money they've saved last. And even before that, they need to pay off the mortgage, downsize and trim expenses so they are lower than when one was working," he said.
Myers recommends her clients read a book by Tim Prosch called “The Other Talk: A Guide to Talking with Your Adult Children about the Rest of Your Life,” which advocates having ongoing conversations with family members. Those discussions should include both what you want to have happen and what you don't, across a range of topics, from ideal living arrangements to medical needs and end-of-life choices. He also recommends introducing to your financial advisors the family members or others who will have some responsibility for your personal matters later. It will help the transition.
Tips from the Fidelity report include encouraging family members to ask detailed questions, "even if the answer seems obvious." The children in 30 percent of the families surveyed didn't agree on whether they even knew where to find key documents. Fidelity said family roles should be clearly defined, such as who will have power of attorney or serve as executor.
The report also notes that discussions should follow a "voice, not vote" rule: While everyone has some voice in the planning process, ultimate decisions belong to the adults who are "charting the course of the rest of their lives."
Finally, nothing replaces the value of ongoing conversations.
Boss is enthusiastic about her family's annual meetings. "I highly recommend this system for all grown-up families! If you can't meet, you could do a conference call. But meetings are really nice!"
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