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When it is time to have the family discussion

Having the dreaded “money talk” has plagued families for decades. It is a touchy, albeit necessary activity that is oftentimes plagued by anxiety, preventing some families from ever moving forward with it. 

Traditional dads were unwilling to talk about money. They were the breadwinners, and what they earned and saved was strictly privileged, confidential information that only wives (sometimes) knew. However, illness would often provoke these conversations.  And with emotions running high, a sit-down with family members was visibly strained.

Logic, not emotion, should drive the conversation

Times have changed. And thanks to the Information Age, we are more open to sharing what was once off-limits. But families must forge ahead. 

Author Michael A. Cole, in his book “More than Money,” points out that about 60 percent of wealth disintegration is actually due to a lack of communication and trust; 25 percent is due to a lack of preparation in how to handle the money, and 10 percent is due to the lack of shared vision about family goals around money. 

If you are the son or daughter of aging parents, you must understand Mom and Dad’s finances, whether they’ve amassed a sizable fortune or a comfortable one; whether they are younger, middle aged or elderly, healthy or ailing. Because whatever happens to them will likely fall squarely on your shoulders. 

For your parents while they are alive 

Before prolonged illness or deteriorating mental capacity sets in, have two types of conversations: one focused on while they’re alive, the other focused on after they’re gone. The wide-ranging importance of these conversations has more to do with advance planning and less to do with the actual dollars involved.  

Ask to see their statements and all pertinent documents. You’ll also want to ask to be introduced to their financial advisor sooner rather than later. 

Timing is everything. So when you ask, “Mom, Dad, how much income do you have coming in and from what sources?” or “What is the current value of your portfolio?” “What are you invested in?” or “Are these investments owned jointly?” you will get a cogent response that is verifiable by both their quarterly statements and their advisor. 

There are several other questions to ask. A complete list of questions is available. 

  • What bank(s) do you use and how much is savings and checking?
  • What debts do you currently have?
  • Do you have long-term care insurance, catastrophic coverage or life insurance?
  • How much coverage do you both have?
  • Have you created a will or trust for estate planning?
  • Who have you named as durable power of attorney?
  • Who are your designated beneficiaries and your trustee?

For your parents after they pass on

No plan is perfect. So in the context of personal, rather than financial wishes, these are important questions to ask. Situations vary, and some of these questions are noted in their will or trust documents. However, they are still worth asking. 

For example, “Who do you want to raise (son, daughter) after you’re gone?” Or  “How old must (son or daughter) be before receiving (his or her) share from the trust?” and “Is college funding included?” A complete list is available to you.

  • If (he or she) precedes you in death, how will you want those assets distributed? 
  • How about personal items – your china, cut glass, dad’s tools and guitars and other valuables – how will you want those distributed?
  • What charitable organizations have you assigned contributions to? 

You might be thinking: “How can I do all of this, not have it take all night, and avoid completely draining their energy and mine?” 

Well, you don’t. It will take more than one meeting over dinners or coffees. Remember that it is not an interrogation; it is an ongoing conversation, and a very important one at that.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.
Financial Planning Department
Hefren-Tillotson

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