Talking about money is uncomfortable, especially with family members. Along with religion and politics, money is a taboo subject that we’ve all learned not to bring up at holidays and other family gatherings. The problem is that if nobody’s talking about it, what happens next to our money? If we don’t talk to our children about finances, for example, and share our successes and struggles, then how will they learn the value of money? Or absent of children, how will we pass our assets on, when the time comes? How can we ensure that the money we’ve worked hard for will not be lost or wasted?
When you bring up the topic of family and money, clients can be reluctant to open that can of worms. What you can tell them, though, is that specific amounts really don’t need to be disclosed—the objective is to at least have a broad discussion. Here’s one way clients can think about it: mine, ours, yours.
First and foremost, encourage your clients to focus on their own finances before tackling anything with their family. Ask them about what they’re doing for their retirement savings, and if there are any small steps they can take this year to increase their savings little by little. Do they buy coffee every morning or go out to lunch most days during the week, for example? Ask them about what they want out of their retirement and what their retirement goals are, and discuss with them all of their options to max out their savings. Finally, ask your clients if they have a solid team in place, from a tax and legal point of view as well as financial. Before these clients start to broach the topic of money, legacy and beneficiaries with family, they really have to take care of themselves—and get their own money in order—first.
No one likes to think of their own mortality, but death is reality. And what happens to our money when that time comes? Generally speaking, it is passed on to family. In the case of inheritance, clients should make sure that they have named their beneficiary (or beneficiaries), and then they need to prepare their chosen person or people to handle that eventual transfer of wealth. Discuss with your clients what options for receiving their assets will be available to their beneficiaries, and help them develop a plan for sharing that information with their loved ones. Offer to have a meeting with the beneficiaries, or at least ask if you can reach out to them so that they have your contact information and a starting point.
Another scenario that is hard to think about, but important to plan for, is the unexpected loss. While your clients might have a strong handle on their own finances and various accounts, what if something happens to them tomorrow? Their loved ones need to know where their assets are being held and how to handle them in your absence. Again, all details do not need to be divulged, but at least sharing contact information or account numbers would help set loved ones up for success, if the worst should happen. No one wants to leave their loved ones in the dark and unprepared—that would not only hurt them, but could also jeopardize the future of our own hard-earned money.
I often hear parents lamenting over their children’s fiscal irresponsibility or their parents’ lack of retirement savings. Sometimes, even if we’ve done everything we can to keep our own finances healthy, our loved ones’ financial well-being can cause us stress. Bring this point up with your clients, as it might not be information they’ve thought to divulge. If you have a client who fits the bill, explain to them how you can help them talk to their family members about their finances. Tell these clients to bring their children or parents to your next meeting. During that meeting, have your clients share their money mistakes and triumphs. Ask the accompanying family members if they are aware of all of their options for retirement savings, taxes, investing, etc. If nothing else, you will have helped start the dialogue between the family members so that, hopefully, your clients can watch out for their own finances while also helping others do the same.
If you find that clients still aren’t convinced by the “mine, ours, yours” plan, because they are still afraid to mix family and money, just leave them with one choice. Would you rather bite the bullet and have the money talk with family, or would you rather spend your retirement sharing your home with and financially supporting your adult children and elderly parents?
All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable.
The preceding is not intended to be a recommendation or advice. This material is intended for general use by financial advisors.