The holiday season is a time for families to come together, share memories and create new ones. Amid all of the gift-giving and other celebrations, holiday gatherings may be one of the few opportunities to provide important financial information to your adult children all at the same time -- as you're all together. The holidays present a unique opportunity for parents to speak with their adult children about a difficult subject -- money.
One of the most important conversations involves plans for your estate -- where assets will end up when one or both parents pass away. If you feel the time has come to broach this topic, find an hour or two to pull everyone together for a conversation.
Here are some tips for speaking with your adult children:
Don't Feel You Need to Provide Specific Numbers About an Inheritance.
While this may seem counterproductive, there are good reasons to avoid disclosing the details. One is that you and your spouse/partner don't know how long you will live. The longer you do live, the more money will be needed to pay for lifestyle needs, long-term care and other expenses.
If your children believe they stand to inherit a specific amount -- especially if it's a large sum -- it could impede their own plans. They may decide to save less money or lose the drive to achieve their goals -- neither which meets the set of values you probably desire to pass on.
In addition, the children could begin to influence your spending decisions. For example, would you choose a mid-range nursing home instead of a better one, knowing this expense will impact their inheritance? And, finally, if your adult children share information about their potential windfall with their spouse, the spouse could use this information to their advantage in the event of a divorce.
Which of Your Children Will Make Health Care and Financial Decisions?
Consider letting the children know which one of them has been designated to make key financial and medical decisions in the event you and your spouse/partner become incapacitated.
The person charged with the financial responsibility needs to have access to key data -- legal documents, financial statements and computer passwords. Place this information in a sealed envelope for your child(ren) and instruct them to open it only when needed if you desire to keep your financial affairs private until then.
For your health care agent, make sure you do discuss your wishes for food, water and life support with them and provide them with the signed health care power of attorney document. If something happens to you, this health care document needs to be quickly accessed.
How Will Children Receive Any Inheritance?
Let your children know how they will receive any inheritance; will it be outright or in a trust? A common reason to establish a trust is to help protect any assets from an unfavorable event, such as a divorce or lawsuit. A trust can also help ensure your money is passed along to any grandchildren if the adult child dies prematurely.
Share Information About Insurance.
Your adult children are likely the people who will care for you later in life, or coordinate your caregiving needs. They need to know information about your medical and long-term care insurance and what to do if there are gaps in coverage. For example, will long-term care insurance cover all your nursing home expenses, or will you need to use personal funds to supplement the cost?
Also, provide children with all life insurance information, including the companies that issue the policies and contact information for your insurance agents.
Gather Information About Professional Advisers.
Make a list of all people your children will need to know and contact in the event of your death or inability to act on your own behalf. These include attorneys, financial planners and accountants, as well as the insurance agents mentioned above.
Finally, Take Their Questions.
While it may be difficult for a parent to share this information, it's even more difficult for most children to discuss their parents' eventual demise. But it's much better to provide them with information and answer any tough questions while you are alive and mentally healthy. A lack of information now may cause confusion and possible conflict among family members down the road.
It may not seem like the right time to discuss this topic, especially if your house is filled with playful grandchildren and everyone wants to enjoy this special season. But the goal is to help your adult children understand how their future will be impacted once you aren't around. So, consider finding a sliver of time to help them understand your financial and estate plans, and how you've prepared to make life easier for them for years to come.
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