Why it’s crucial to talk about finances with your family

Although it can be difficult to consider the reasons your children may need to step in and manage your finances, preparing for the future can help save you and your children much pain and stress down the road.

Avoiding future confusion and conflict

Financial conversations help prevent uncertainty. Whether you’re talking to your parents about their estate plans or discussing inheritance with your adult children, addressing these topics early can clarify your wishes.

Families often experience confusion when key financial decision-makers pass away or become incapacitated, leaving their children or spouses to scramble to figure out where everything is, how to access accounts, and how to carry out their wishes. This is the last thing you want your family to have to deal with when they are grieving.

Plus, without these conversations, the risk of conflict grows. Children may interpret wills or financial documents differently, leading to misunderstandings or disputes, which can strain sibling relationships and cause lasting emotional damage.

Protecting family finances

Families with significant wealth face unique challenges, as they often aim to instill values of stewardship and responsibility in the next generation. But without transparent discussions, children may not be adequately prepared to manage the family’s assets.

Even for families of more modest means, it’s crucial to ensure children know how to access important documents and understand how to manage the estate.

Navigating potential cognitive decline

For many, the possibility of cognitive decline, such as Alzheimer’s or dementia, adds urgency to these conversations. Without a clear understanding of your financial picture, children may struggle to provide support or make decisions on your behalf, adding stress to an already emotional situation.

Unfortunately, at Granite, we are frequently called on by families who have waited too long to have these conversations. None of us want to talk about the potential of cognitive decline, but the truth is that it is likely to impact us or someone we love. According to the National Council on Aging, “[a]pproximately two out of three Americans experience cognitive impairment at an average age of 70 years.”

Depending on the level of cognitive decline a person is experiencing, they might not be able to sign important documents, make their wishes known, or even establish a power of attorney. And without proper documentation, management of finances becomes unnecessarily difficult, complicated, and stressful.

The benefits of talking about finances with your children

Many of us have been taught that conversations about money are taboo, but it’s time to challenge that. Especially when having these discussions offers numerous benefits, including:

• Confidence for parents: Knowing that your children understand your financial wishes and how to manage your estate provides immense relief. You can rest assured that your family will be able to navigate your finances without confusion or unnecessary strain.
• Emotional support for children: By being transparent now, you save your children from the emotional toll of trying to figure things out during a time of loss.
• Prohibiting self-Interested parties: Clear financial discussions help protect against potential exploitation by self-interested parties or outsiders who might take advantage of a family member in a vulnerable situation.
• Ensuring proper distribution: These conversations help ensure that your assets will be used and distributed according to your wishes. It also helps children avoid costly legal processes like probate, which can diminish the assets left behind.

Tips for having successful money conversations with your family

It’s one thing to understand the importance of these conversations, but how do you approach them without causing discomfort? Here are some practical tips for navigating this delicate topic:

1. Choose the right time

   Timing matters. Don’t wait until a crisis hits to have this conversation. Start early, when everyone is calm and there’s time to think through the details. You don’t have to dive into everything at once; you can have ongoing discussions that build over time.

2. Be transparent and direct

   Be clear about what you want to discuss, and don’t shy away from important details. Whether it’s talking to your parents about their estate or explaining your own financial wishes to your children, transparency is key. This includes discussing where financial documents are stored, how accounts are accessed, and who is designated as the executor or trustee.

3. Involve everyone

   For families, it’s helpful to involve all key members in the conversation — whether that’s both parents, all adult children, or trusted advisors like your investment advisor. This ensures that everyone is on the same page and reduces the risk of misunderstandings later.

4. Focus on values and legacy

   When talking to kids about money, frame the conversation in terms of values. Families with significant wealth often want to impart a sense of responsibility and stewardship to their children. Discuss how the money should be used to reflect the family’s values and legacy, rather than focusing solely on the numbers.

5. Be prepared to answer questions

   Your children will likely have questions, especially if they are learning about your financial situation for the first time. Be open to discussing your reasoning for certain decisions and encourage them to ask questions so they feel confident handling the responsibilities you may pass on to them.

6. Discuss contingencies

   What would happen if you were suddenly incapacitated? Would your spouse be able to manage the finances? Would your children know where to find your estate documents or passwords? These are critical questions to address in your conversation, helping ensure that everyone is prepared in case of an emergency.

Money conversations with family aren’t easy, but they are essential. By encouraging financial conversations now, you’re setting your family up for success — not just in managing assets, but in preserving relationships.

Granite Wealth Management specializes in family finances, legacy, and continuity of wealth and assets. If you would like to talk to an investment advisor about preparing necessary financial documentation or need advice on involving your family in crucial financial conversations, we hope you will reach out.