A recent survey found that an overwhelming number of parents are reluctance to discuss financial matters with their children. However, that's not in anyone's best interest. Disorganization and miscommunication can be costly. The costs can be in dollars, as heirs miss tax deadlines and other opportunities as they sort through parent’s files, and in hurt feelings and confusion, as children struggle to understand their parents' decisions.
Here are some ideas for boomers who want to start the process:
Decide how you want to communicate. Don't ambush your children with this discussion. Instead, the first conversation should be how to have a discussion about this subject. Tell them what you want to discuss and ask them how they'd like to proceed. Ready them for several conversations so that they're not overwhelmed with everything in one sitting. If you have several kids, ask if they'd like one-on-one conversations or a group talk. Decide on a date for the first conversation, set the agenda, and review your financial and estate planning documents.
Don't start with the bottom line. You might want to jump to the big stuff and discuss who's getting what, but an estate plan involves much more than divvying up assets. It should involve values, which ideally started with parents talking about money with their children when they were young and emphasizing the value of hard work and the importance of saving. If that didn't happen, it's never too late to start. Next, discuss who you plan to designate as your health care power of attorney to make medical decisions in the event you can't do so yourself and who you'll name as your financial power of attorney to handle financial transactions on your behalf. Many people name their spouse as their primary agent, but you should also name a younger person to serve as a secondary agent if the first can't. Also, mention who you plan to name as the executor of your will.
Get some feedback. Children's feelings may be hurt if they don't understand why you designated one child over the other. Tell them your reasoning and ask for input through phrases like "Am I missing anything?" or "Tell me if I'm thinking about this the right way." But remember that you're the ultimate decision maker, and you don't need to change your plans because of your children's opinions. You can just say, "I respect your feelings, but I decided to go ahead with this plan."
If the discussion about powers of attorney and executors doesn't go well, you may think about ending it right there and not discussing your assets. If the discussion goes south, maybe you need to just let your will or trust do the talking after you're dead. You can always include a letter of intent explaining decisions posthumously.
Move carefully with the assets. If you decide to discuss your assets, proceed with caution. There may be arguments over small, symbolic items like jewelry. If so, parents could ask their children which items they'd like the most and do their best to give them some of them.
When it comes time to divvy up the assets, most of us don’t know how much money will be left at death so using percentages instead of dollar amounts is almost always a better plan. Adult children still need to know where assets are located especially if they need to pay for long-term care. Having these discussions now, while you’re healthy, makes it much easier to communicate;. waiting until your loved ones are in the middle of dealing with your sudden accident or illness can be a recipe for disaster. Nor is it a bad idea to involve your estate planning attorney in this conversation along with your loved ones. He or she can answer any technical questions that might arise.
Reference: MarketWatch (January 29, 2016) "How to tell your kids how much money you're leaving them"