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Have you ever had a “money talk” with your parents?
Talking about money is emotionally charged. When it comes to family conversations, it can be downright uncomfortable.
However, for many Americans who are likely to inherit wealth from now on, the time for silence is over.
What is considered the largest generational transfer of wealth in history is underway. Nearly half of Americans plan to leave an inheritance, with 45 percent planning to leave it to their children only and 36 percent planning to leave it to their children and grandchildren, according to Edward Jones research.
Between now and 2045, it is estimated that 84 trillion dollars will be passed on to heirs. The bulk of these assets, more than $53 trillion, will be transferred from baby boomers to their children. Those in the silent generation — ages 78 to 96 this year — will transfer $15.8 trillion.
Yet only a quarter of Americans have had “the conversation” about how much and how that wealth will be passed on.
“Talking to elderly parents about their cases is a stressful and embarrassing experience for virtually everyone,” said Liz Davidson, CEO and founder of Financial finessetold Yahoo Finance.
And many children are simply unaware of their parents’ finances.
“Like most millennials, I have no idea how wealthy my baby boomer parents were,” Brian Sozzi, executive editor of Yahoo Finance, wrote in a recent column. “Like, no idea. None. Nothing. Nothing.”
There are many reasons why parents are reluctant to share this information with their children, starting with a wall of privacy that many people have about disclosing their wealth. Some parents worry that if their children know what’s coming, they’ll lose their ambition. Many retirees want to make sure they have enough money to last them, given the rising cost of healthcare and other living expenses, along with a longer life expectancy.
“Most clients are concerned about having enough wealth for themselves,” said Eileen O’Connor, founder of Hemington Wealth Managementtold Yahoo Finance.
Learn more about high yield savings accounts, money market accountsIt is CD Accounts.
Family money conversations can be tense. (Getty Creative) (Pascal Broze via Getty Images)
But if you can open the door to this family conversation, you may be surprised to find that many parents are inclined to leave some of their wealth while they are still alive and eager to talk.
“More and more clients are choosing to make wealth transfers to their children while they are alive, rather than waiting until they die, because they can enjoy seeing the impact of their gifts when the children need it most,” O’Connor said.
Sure, it may take a little tap dancing to get the conversation started.
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Here are four opportunities that can be a springboard for “the talk.”
1. When parents are downsizing, or health problems arise
Many of these discussions between parents and children only begin when the parents are in their 70s or when a health crisis occurs, David Peterson, head of advanced wealth solutions at Fidelity Investments, told Yahoo Finance.
But the sooner the better.
A step forward in the conversation might come when your parents are going through their home, maybe even the one you grew up in, to decide what to keep and what to donate.
You can, as my brother Jack did, point out a special object that is meaningful to you. In his case, it was a stunning grandfather clock in our parents’ living room. He asked when they bought it, or if it had been passed down from another family member. It was an icebreaker that gradually segued into other discussions about money as they took stock of what they had accumulated.
“I suggest that clients open a discussion with family members about wealth transfer with non-financial concerns,” said Danielle Howard, a certified financial planner at Wealth by Design in Glenwood Springs, Colorado, told Yahoo Finance.
“Wealth is about so much more than money, and if we can have families, it starts with questions like, ‘What does legacy mean to you? How do you want to be remembered? What values do you want to see live on in our family?’”
“By giving families the opportunity to hear stories about what their idea of true wealth is, we can then unpack the financial dynamics. If we don’t have the values conversation ahead of time, there will be a disconnect,” Howard said.
When parents move into smaller homes, it may be time to start a conversation about inheritance. (Getty Creative) (PeopleImages via Getty Images)
2. Holiday meetings
A happy family gathering can create an impromptu opportunity.
Bring up your earliest memory of a money lesson your parents taught you. It might be a funny, lighthearted memory, but it can spark a conversation with a touch of vulnerability and shared experience while honoring them at the same time.
3. Your financial or estate planning
Another way to open the discussion is if you’re working with a wealth manager. Tell your parents about the process, what excites you about it, and how you’re building a holistic financial plan for you and your family.
“While it can be very difficult to broach the topic of the entire estate, conversations often begin with planning for higher education for grandchildren, which is a great way to start a broader conversation,” O’Connor said.
Another angle: “Talk about how you met with a lawyer to draft powers of attorney for financial and health care situations so that someone, say your spouse, can handle things if you’re in a situation where you can’t make those choices yourself,” Peterson said.
So ask your parents what safeguards they have in place. “Or you could casually mention that you recently read about how important it is for children to have access to their parents’ personal financial information in case they need help managing their money,” he added.
4. Formal family meeting
Some families may feel more comfortable having a formal family meeting with someone impartial.
“Proactively talking to your parents about this topic in a safe environment, ideally with the help of a financial coach or other third party, can significantly reduce stress and friction and prevent major rifts or disagreements due to differences of opinion or miscommunication,” Davidson said.
You can open the agenda by drawing a word from a jar, and then each person discusses what their word means to them. The word could be “legacy” or “wealth.” It can evolve into impromptu reflections that can be humorous, passionate, or vulnerable, setting the stage for the details that follow.
“The conversation” doesn’t start and end in one session. You’ll need to do periodic check-ins. (Getty Creative) (The Good Brigade via Getty Images)
“An intentional meeting in a distraction-free space will allow the conversation to flow better than one that starts in the heat of the moment,” Davidson said. “Children need to really hear what their parents want and what they might be afraid of.”
This conversation doesn’t start and end in one session. You’ll need to do periodic check-ins.
If your parents are open, talk about where they keep important documents, such as the house deed, tax returns, wills, trusts and powers of attorney, Peterson said.
Get a list of your bank and investment accounts, insurance policies, credit cards, passwords, as well as contact information for your doctors, accountants, lawyers, mortgage companies, financial planners, and brokerages.
If your parents are retired, you may want to ask about various sources of income, such as pensions, Social Security, and IRA withdrawals. Be sure to store these documents in a safe place, such as a law office or a safe deposit box.
“You don’t need to know the specific details of each account,” Peterson said, “but it’s important to know they exist with instructions on how to access them, including any vaults, when the need arises.”
Read more: What is the retirement age for Social Security, 401(k) and IRA withdrawals?
What the transfer could mean for your financial planning
Once you have an idea of what’s coming for your own inheritance, take it slow. You can start the process of talking to your own financial advisor about what this might look like and when a transfer might happen. You and your advisor should review tax planning issues and discuss how the inheritance works into your overall financial blueprint — where it fits into a diversified portfolio, as well as your personal financial dreams and goals.
My husband and I recently had this conversation with our new advisory team about how we would like to transfer assets and to whom. We’re not quite there yet, but our meeting put the issue on the table and at the forefront of our minds and has spurred an interesting conversation to continue with our nieces and nephews.
Kerry Hannon is a senior columnist for Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “In Control at 50+: How to Succeed in the New World of Work” and “You’re never too old to get rich.” Follow her on X @kerryhannon.
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