Talking about money is charged with emotions. When it comes to family conversations, it can be downright awkward.
For many Americans now likely to inherit wealth, however, the time for keeping quiet about it is over.
What is considered the largest generational transfer of wealth in history is underway. Nearly half of Americans plan to leave an inheritance, with 45% planning to leave it only to their children and 36% planning to leave it to both their children and grandchildren, according to research from Edward Jones.
Between now and 2045, an estimated $84 trillion will be passed on to heirs. The bulk of those assets, more than $53 trillion, will be transferred from baby boomers to their children. Those in the Silent Generation — between the ages of 78 and 96 this year — will transfer $15.8 trillion.
Yet only a quarter of Americans have had “the talk” about how much and how that wealth will be passed on.
“Talking to aging parents about their affairs is a stressful, uncomfortable experience for almost everyone,” Liz Davidson, CEO and founder of Financial Finesse, told Yahoo Finance.
And many children simply don’t know how their parents’ finances are doing.
“Like most millennials, I have no idea of the wealth of my baby boomer parents,” wrote Brian Sozzi, editor-in-chief of Yahoo Finance, in a recent column. “No idea. No. ZERO. Nada.”
There are many reasons why parents are reluctant to share this information with their children, starting with the wall of privacy many people have when disclosing their assets. Some parents worry that if their children know what is going to happen, they will lose their ambition. Many retirees want to be sure they have enough money for their own living, given the rising costs of healthcare and other living expenses, along with longer lifespans.
“Most clients are concerned about whether they have enough equity,” Eileen O’Connor, founder of Hemington Wealth Management, told Yahoo Finance.
Learn more about savings accounts with a high return, money market accountsAnd CD accounts.
But if you can open the door to this family conversation just a crack, you might be surprised to learn that many parents are willing to pass on some wealth while they are still alive and eager to talk.
“More and more clients are choosing to pass on their wealth to their children while they are still alive, rather than waiting until they die, because they can see the impact of their gifts when their children need them most,” O’Connor said.
Of course, it may take some tap dancing to get the conversation going.
Here are four options that can be a springboard into “the conversation.”
1. When parents cut back, or health problems arise
According to David Peterson, head of advanced wealth solutions at Fidelity Investments, many of these parent-child conversations don’t begin until the parent is about 70 or there is a health crisis.
But the sooner the better.
A sidebar in the conversation might be for your parents to go through their home, perhaps even the home where you grew up, to decide what they want to keep and what they want to get rid of.
You could, like my brother Jack, point to a special object that is meaningful to you. In his case, it was a striking grandfather clock in our parents’ living room. He asked when they had bought it, or if it had been passed down from another family member. It was an icebreaker that gradually led to other discussions about money as they took stock of what they had acquired.
“I suggest that clients start a discussion with family members about wealth transfer with non-financial questions,” Danielle Howard, a certified financial planner at Wealth By Design in Glenwood Springs, Colorado, told Yahoo Finance.
“Wealth is much more than money, and if we can get families to start asking questions like, ‘What does inheritance mean to you? How do you want to be remembered? What values do you want to see live on in our family?
“Giving families the opportunity to hear stories about what their idea of true wealth is helps us break down the financial dynamics. If we don’t have the conversation about values up front, there will be a divide,” Howard said.
2. Holiday gatherings
A fun family party can create an opportunity in a spontaneous way.
Bring up your first memory of a money lesson your parents taught you. It can be a funny and lighthearted memory, but it can also spark a conversation with a touch of vulnerability and shared experience while honoring them.
3. Your financial or estate planning
Another way to open up the discussion is if you work with an asset manager. Tell your parents about the process, what excites you about it, and how to build a holistic financial plan for yourself and your family.
“It can be difficult to broach the topic of the entire estate, but conversations often start with higher education planning for the grandchildren, which is a great transition to a broader conversation,” O’Connor said.
Another angle: “Talk about how you’ve worked with an attorney to set up powers of attorney for financial and health-care situations so that if you ever find yourself in a situation where you can’t make those choices yourself, someone like your spouse can handle things,” Peterson says.
Then ask your parents what protections they have in place. “Or you might casually mention that you recently read about how important it is for children to have access to their parents’ personal financial information, in case they ever need help managing their money,” he added.
4. Formal family gathering
Some families are more comfortable having a formal family discussion with someone who is impartial.
“Talking proactively with your parents about this issue in a safe environment, ideally with the help of a financial coach or other third party, can significantly reduce stress and friction and prevent major rifts or arguments due to disagreements or miscommunication,” says Davidson . said.
You could open the agenda by picking a word from a jar, and then everyone discusses what their word means to them. The word might be “legacy” or “wealth.” It could evolve into impromptu reflections that might be humorous, passionate, or vulnerable, setting the stage for the heart of the matter to follow.
“A mindful meeting in a space without distractions is going to make the conversation flow better than a conversation that starts in the heat of the moment,” Davidson said. “Kids really need to listen to what their parents want and what they might be afraid of.”
This conversation doesn’t start and end at once. You must check in periodically.
If your parents are open to it, discuss where they keep essential documents, such as the deed to their home, tax returns, wills, trusts and powers of attorney, Peterson said.
Request a list of their bank and investment accounts, insurance policies, credit cards, passwords, and contact information for their doctors, accountant, lawyer, mortgage lender, financial planner, and brokerage firm.
If your parents are retired, you may want to ask about different income streams, such as a pension, Social Security, and IRA withdrawals. Make sure to keep these documents in a safe place, such as a lawyer’s office or a safe deposit box.
“It’s not necessary to know specific details for each account,” Peterson said, “but it is important to know its existence, with instructions on how to access it, including any vaults, in case that is necessary.”
Read more: What is the retirement age for Social Security, 401(k) and IRA withdrawals?
What the transfer can mean for your financial planning
Once you have an idea of what to expect for your own legacy, take it slow. You can start the process by talking to your own financial advisor about what that might look like and when a transfer might take place. You and your advisor should discuss tax planning issues and how inheritance fits into your overall financial blueprint – where it fits into a diversified portfolio and into your personal financial dreams and goals.
My husband and I recently had a conversation with our new advisory team about how we would like to transfer assets and to whom. We’re not there yet, but our meeting has put the issue on the table and above our attention and has led to an interesting conversation that we can continue with our cousins.
Kerry Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and author of fourteen books, including ‘Staying in Control at 50+: How to Succeed in the New World of Work and “Never too old to get rich.” Follow her on X @kerryhannon.
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