The holidays offer a prime opportunity to begin conversations about family finances. However, these discussions can also happen at any family gathering where siblings and children are present. Research has shown that Americans often find discussing money uncomfortable.
A U.S. Bank survey revealed that people would rather disclose their presidential election choices than their financial details. Similarly, Wells Fargo research found that talking about personal finances is almost as difficult as discussing sex. To ease into the conversation with aging parents, experts suggest starting small.
David Peterson, head of advanced wealth solutions at Fidelity, advised against trying to resolve everything in one conversation. Instead, he recommended talking about your own estate plan and seeking their advice, which can help gauge how far along they are in their financial planning. Bringing up examples of friends or relatives who died with either organized or disorganized estate plans can also provide useful starting points.
Peterson explained that wealth can be transferred through asset titling or beneficiary designations, but assets that do not pass this way require a will. Without such planning, the state’s probate process will take over, determining the distribution of assets.
Starting family finance conversations
In addition to a will, having a health care directive, power of attorney, and HIPAA authorization is crucial in case a parent’s health deteriorates, according to MaryAnne Gucciardi, a certified financial planner at Wealthmind Financial Planning in Cambridge, Massachusetts. These documents should be reviewed periodically to ensure they are up to date. Often, people lose track of assets accumulated over a lifetime, such as savings bonds or insurance policies.
Creating a central, easily accessible location for these documents, either physically or digitally, is advisable. Bank safe deposit boxes should be avoided due to potential access issues for loved ones. As more assets are stored online, discussing access to online financial accounts, subscription services, and social media accounts is essential.
Gucciardi suggested using a password manager to secure these accounts. Starting with small topics, such as health care preferences, and gradually addressing more complex financial matters can make the conversation less daunting. Books can also serve as conversation starters, Gucciardi noted.
During these discussions, it is important to listen more than talk and ask open-ended questions. Engaging in these conversations early and regularly can significantly ease the financial and emotional burden on families, ensuring that everyone’s wishes are understood and respected.
