Estate Planning

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One of Intelligent Investing’s four unique factors is to unify families in their financial communication. What better time to talk about finances and money with family than over the holidays. Wait a second….you may be thinking, “You do not understand my family. We have a hard time communicating about anything, let alone a touchy subject like money.” You are right. I may not know the history or nuances of your family, but based on my prior blog series, How to Get Naked…, I talked about the freedom from being vulnerable. It takes some common sense and humility to bring up the right topic at the right time.

Sometimes the conversation comes up naturally. Perhaps you compliment your grandma’s piece of jewelry, and she responds with, “I’ll make a note to leave it to you in my will.” Other times, it will be worth making a deliberate effort to sit down with the family after a meal to get that conversation ticked off the to-do list while everyone who needs to be involved is together. You may want to avoid the taboo subjects of politics and religion, but money should definitely be on the table as a potential topic of conversation. Here are three financial chats you may consider over the holidays.

End of Life Planning

I can’t tell you how many conversations I’ve had where children were surprised by the complexities of end-of-life planning for their parents. This can be a touchy subject as children don’t want to appear nosy, and parents don’t want to necessarily share all they’ve accumulated over their lifetimes. Americans in general are private people when it comes to money. However, dementia and other diseases are continuing to hit many homes, and talking about end-of-life should be handled delicately. As you may have read from my other blog, I provided 10 tips for when your parent becomes a child. It doesn’t have to be morbid, but you can discuss about the oldest generation’s wishes and desires for the future. Many of them have been thinking about it throughout the year, and may be ready to share their thoughts with their children.

However, please use your best judgment. If someone in the family has a terminal illness, it’s likely inappropriate to discuss wills, estate plans and anything that has to do with death and money. The topic is too raw and should be conducted very privately and with specific sensitivity.

Family Legacy

One of Intelligent Investing’s core values is Legacy. We believe it is just as important to pass on family values as it is to pass on financial assets. Unsolicited advice continues to be pretty unpopular–but younger family members can learn from older family member’s frank discussions about their own financial successes, failures, and lessons. A teenager may be more receptive to advice from a doting grandparent or their favorite aunt than from their uncool mom or dad. For example, if done the right way, a parent (with a child who may be heading down a path of debt) could ask a grandparent how they dealt with debt when they were younger. Warning- if the teenager suspects that you are trying to teach a lesson in an ingenuine way, the lesson may be lost.

Christmas gift-giving presents another opportunity for family members to select a present that comes with its own financial lesson. For small children, the gift may be a piggy bank to teach about saving and delaying gratification. For older children, a gift contribution to a 529 college savings plan or retirement account may teach about long-term goals and visions for the future.33

Savings and Investing

Children may be able to have a good conversation about their parents’ financial situation by asking whether they have a plan for long-term care and retirement. Because money is so often taboo, the children may not want to appear to pry into their parent’s financial lives. However, if children don’t ask whether mom or dad have a financial plan, then parents may do what they think is best without their children’s input. Unfortunately, as baby boomers age, they also continue to be the target of salespeople and scam artists. A child could prevent a major multi-generation financial crisis by asking the right questions or reviewing financial documents with parents.

Some children may learn that mom or dad are considering purchasing or have already purchased a large variable annuity contract or other product. Many times these contracts come with steep penalties and long lock-up periods, and are not what they seemed when sitting across the table from a “financial planner.” Sometimes the parents will unknowingly meet with an annuity salesperson, who plays on their fears, and by the time the children find out, the ink has dried.

Although many annuities are sold more than they are bought, some may be appropriate for a specific reason or situation. If your parent is considering purchasing an annuity, we’d be happy to sit down with them to share an unbiased opinion and review the contract to let them know what they are really purchasing. If your parent happened to have already purchased an annuity, Intelligent Investing has an annuity rescue program that may be able to reduce many of the expenses through what’s called a 1035 tax-free exchange. We’d be happy to discuss with you and your parent(s) at the appropriate time.

Freedom from Want

One of my favorite pastimes was to visit my grandparents and look through their Norman Rockwell coffee table book. It was filled with humor and realistic pictures of America. In 1943, inspired by FDR and to raise money for the war effort, Norman painted Freedom from Want. The picture depicts multi-generations of family gathering around a table, laughing and talking… I can envision a good family chat about finances as they carve up the turkey.

I trust you may spend time reflecting on the true reason why we celebrate Christmas, and how we once-and-for-all were given “freedom from want.”

Final Thoughts

Don’t put too much pressure on yourself to check off all the boxes for your money talk. The chat you have may simply be a start of an ongoing discussion encouraging transparency and financial responsibility in your family. Setting healthy expectations is a way to continue the dialogue. If it starts getting uncomfortable, you can always cut it short by saying, “I really think this is an important topic–can we pick up the conversation over coffee on Saturday?”

If there is anything we can do to bridge the financial communication gap, let us know.