Talking about money is an emotional issue. And when it comes to family conversations, it can be downright awkward.
However, for many Americans who stand to inherit wealth from now on, the time for silence is over.
What is being billed as the largest generational wealth transfer in history is underway. Nearly half of Americans plan to leave an inheritance, with 45% planning to leave it only to their children and 36% planning to leave it to both their children and grandchildren, according to search for Edward Jones.
By 2045, it is estimated 84 trillion dollars will be passed on to the heirs. The bulk of these assets, more than $53 trillion, will be transferred from baby boomers to their children. Members of the Silent Generation – ages 78 to 96 this year – will transfer $15.8 trillion.
Yet only a quarter of Americans have “discussed” how much and how this wealth will be passed on.
“Talking to elderly parents about their affairs is a stressful and awkward experience for almost everyone,” Liz Davidson, CEO and founder of Financial finessetold Yahoo Finance.
And many children are simply unaware of what is going on with their parents’ financial situation.
“Like most millennials, I have no idea how wealthy my baby boomer parents were,” said Brian Sozzi, editor-in-chief of Yahoo Finance. wrote in a recent column. “Like, no idea. None. Nothing. Nada.
There are many reasons why parents are reluctant to share this information with their children, starting with the wall of confidentiality that many people have when it comes to disclosing their assets. Some parents worry that if their children know what’s coming, they will lose their ambition. Many retirees want to make sure they have enough money for their own lives, given the rising cost of health care and other living expenses, as well as the lengthening of life spans.
“Most clients worry about not having enough wealth themselves,” says Eileen O’Connor, founder of Hemington Wealth Managementtold Yahoo Finance.
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But if you can open the door to this family conversation, you might be surprised to find that many parents tend to pass on some of their wealth while they are still alive and willing to talk.
“More and more clients are choosing to transfer their wealth to their children during their lifetime rather than waiting until they die, because they can see the impact of their gifts when their children need them most,” O’Connor said.
Of course, sometimes it takes a few taps to get the conversation started.
Here are four opportunities that can serve as a springboard to “the discussion.”
1. When parents downsize, or health problems arise
Most of these parent-child discussions don’t start until the parent reaches age 70 or a health crisis hits, David Peterson, head of advanced wealth solutions at Fidelity Investments, told Yahoo Finance.
But the sooner the better.
A side step in the conversation may come when your parents visit their home, perhaps even the one you grew up in, to decide what to keep and what to give up.
You might, like my brother Jack did, point out a special item that has meaning to you. In his case, it was a grandfather clock chiming 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 turned into more discussions about money as they took stock of what they had accumulated.
“I suggest clients open a discussion with family members about wealth transfer with non-financial questions,” says Danielle Howard, certified financial planner at Wealth by design in Glenwood Springs, Colorado, told Yahoo Finance.
“Wealth is about more than money, and if we can get families to start by asking themselves questions like, ‘What does legacy mean to you? How do you want to be remembered? What values do you want to see lived out 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 a conversation about values up front, there’s going to be a disconnect,” Howard said.
2. Holiday gatherings
A happy family reunion can spark an opportunity spontaneously.
Talk about your first memory of a money lesson your parents taught you. It can be a funny and light-hearted memory, but it can also spark conversation with a touch of vulnerability and shared experience, while honoring them.
3. Your financial or estate planning
Another way to open the discussion is to work with a wealth manager. Talk to your parents about the process, what you’re passionate about, and how you’re developing an overall financial plan for you and your family.
“While it can be very difficult to broach the topic related to the entire estate, conversations often begin with planning for higher education for grandchildren, a great segue into a broader conversation,” she said. O’Connor said.
Another angle: “Discuss how you met with an attorney to draft powers of attorney for financial and health situations so that someone, say your spouse, can handle things if you ever find yourself in a situation where you can’t make those choices yourself,” Peterson said.
Then ask your parents what safeguards they have in place. “You might also casually tell them that you recently read 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. Official family reunion
Some families may prefer to have a formal family meeting with an impartial person.
“Proactively talking to your parents about this issue in a safe setting, ideally with the help of a financial coach or other third party, can significantly reduce stress and friction and avoid major breakups or falling outs due to differences of opinion or communication problems,” 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.” This can evolve into impromptu reflections that can be humorous, passionate, or vulnerable, setting the stage for the essentials to follow.
“An intentional meeting in a space without distractions will allow the conversation to flow more smoothly than a meeting that begins in the heat of the moment,” Davidson said. “Kids really need to listen to what their parents want and what might scare them. »
This conversation doesn’t start and end all at once. You’ll need to do periodic check-ins.
If your parents are open to it, discuss where they keep essential documents, such as the deed to their home, tax returns, wills, trusts and powers of attorney, Peterson said.
Get a list of their bank and investment accounts, insurance policies, credit cards, passwords, as well as contact information for their doctors, accountants, lawyers, mortgage companies, financial planners and brokerage firms.
If your parents are retired, you can ask about various sources of income such as pensions, Social Security and IRA withdrawals. Be sure to keep these documents in a secure location, such as a lawyer’s office or safe.
“It is not necessary to know the specific details of each account,” Peterson said, “but it is important to know its existence and have instructions on how to access it, including the safes , in case it might be necessary. »
Learn 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 in store for your own legacy, take it easy. You can start talking to your own financial advisor about what this might look like and when a transfer might take place. You and your advisor should review tax planning issues and discuss how the inheritance fits into your overall financial plan – its place in a diversified portfolio as well as your personal financial dreams and goals.
My husband and I recently had this discussion with our new advisor team about how we wanted to transfer our assets and to whom. We’re not there yet, but our meeting put the issue on the table and at the top of our minds and sparked an interesting conversation to continue with our nieces and nephews.
Kerry Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “In control at 50 and over: how to succeed in the new world of work » and “Never too old to get rich”. Follow her on X @kerryhannon.
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