Saturday, August 15, 2020

Your Money and Adult Children: What Should You Tell Them and When?

Do your adult children treat you like a piggy bank?
Over the next two to three decades, trillions of dollars of wealth will be transferred from Baby Boomers to their adult children.  At the same time, most Baby Boomers will need that money to live on until they pass away.  This creates a dilemma.  On one hand, you want your adult children to have some information about your finances, so they can easily take things over if you become seriously ill, develop dementia, or pass away.  On the other hand, you do do not want your children looking at you and your nest egg as a piggy bank they would like to tap while you are still alive and need the money for your own expenses.  How can you strike the right balance between giving them enough information at the right time, without divulging too much information? 

To make this issue even more difficult, the Covid-19 pandemic has created more stress for many senior citizens.  Thousands of them are falling sick.  Approximately 1000 people a day are currently dying of Covid-19, in addition to other illnesses, and roughly 85% of those Covid-19 deaths are in older Americans.  This presents the very real possibility that you could die much sooner than expected. Before you decide when and what to tell your children, you need to consider all the different issues carefully.

Are Your Children Mature Enough to Handle the Information?

The first question you want to ask yourself is how your children will handle the information you want to reveal to them.  Are they financially and emotionally stable enough on their own, that they will not begin turning to you every time they get behind on their credit cards or other debts?  Are they already building their own retirement accounts and understand the value of saving for the future, or are they living month-to-month, always short of money?  If the situation is the latter, you may want to wait to let them know the full value of your assets, so they do not begin to constantly beg you for help, putting your own retirement at risk.  This is especially true if you have gotten into the habit of rescuing them every time they fall behind.  If they find out you have a large nest egg, they may begin to push even harder for financial aid, making life more stressful for you.  Consider these issues carefully before you let your children know you have accumulated an amount that may seem to them like a great deal of wealth.

Let Them Know If You are Barely Getting By

On the other hand, if you have suffered serious financial setbacks and barely have enough money to make it through the next few years, you should let your children know your situation. First, it will lower their expectations that you can help them financially and give them lavish gifts for holidays and birthdays. Second, they may be able to help you out if your situation becomes dire.  Many seniors who are living only on Social Security have moved into the homes of their adult children, or their children have helped cover a portion of the cost of an assisted living facility.  You and a single adult child may even decide to live together and share the expenses.  Multi-generational families are becoming more common in the United States, again.
Even if your children cannot help you out financially or provide you with a place to live, they may be able to assist you in completing the complicated forms to get additional financial assistance from the state and federal government.  Programs such as SSI (Supplemental Security Income), SNAP (food stamps), Medicaid coverage for a skilled nursing facility, or rent vouchers can stretch your dollars, but the applications can be difficult and you may need assistance to avail yourself of the programs.  These programs can be life-changing, however, so do not hesitate to apply if you need the help.

Make a List of Your Assets and Put it in an Accessible Place

While you may not want to reveal specific numbers to your children, if you have a wide variety of assets, it is wise to make a list of those assets, including bank account and brokerage firm account numbers. If they need passwords to access the accounts, make sure that information is included in the list, too.  Let your children or other heirs know where they can find this information if something happens to you. 

In this way, if you are hospitalized or become seriously ill, your children will have the information they need to access your money to pay your bills, cover your medical costs, and handle any other necessary expenses.

Have a Will, Trust and Executor

Make sure you have a will and trust, (ad) even if it is a do-it-yourself one, and appoint an executor to handle your estate. Give this person your power-of-attorney, so they can act if you are unable to. If you are not confident your children are capable of handling your finances in a responsible way, talk to your lawyer about appointing a paid trustee to handle your finances, should the need arise. 

Even if you do not give your children specific information about your net worth, you still want to let them know that you have a will and trust, as well as the person who will be your executor.  If your executor is one of your children, let the others know that you love them all, but that you chose this person because they have a business background, or live the closest to you, or whatever other reason was behind your choice.

Provide the Contact Information for Your Advisors

If something happens to you, your children may not know where to start in order to move forward.  As a result, along with your will, trust and list of account numbers, you should also have a list of the people who have been helping you set up your finances and estate plan.  This would include the lawyer who drew up your will, your financial advisor or stockbroker, and your banker, if there is one you have worked with closely. 

Make End-of-Life Plans

Finally, while you are still in good health and they are not worried that they are about to lose you, you should discuss your end-of-life plans with all of your children.  Do you have an Advanced Directive or Living Will? (Ad)  Have you made funeral plans?  Do you have any special requests about how you would like things handled when you are near the end of your life or after you die?  You should give this information to your children as soon as you make the plans.

Keep Things Organized

My husband and I have a large notebook we titled "In the Event of our Deaths" and we keep it in plain view on a shelf in our home office.  In the notebook is a copy of our wills, trust, life insurance policies, health insurance information, funeral plans, a list of who to contact, helpful information for an obituary, and everything else we think would be useful to our children if something happens to us.  Even if you are still a young adult, this is good information to put in one place and make accessible to your heirs.  What if you are seriously injured or die in an automobile accident?  You would want your family to easily have the information they need, without spending hours digging through files.

If you take these steps, you can rest easy knowing that your children have the basic financial information they need to help you in an emergency, without divulging so much information that they become dependent on you for financial support.

If you are interested in learning more about financial planning, Social Security, Medicare, where to retire, common medical issues as you age, travel and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional helpful articles.

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1 comment:

  1. Your family is very lucky to have considerate parents like you. The notebook idea is a good one!


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