Financial Sharing With Adult Children: How Much and When? by Bob Lowry
A few weeks ago a regular reader asked for some feedback on a question that was bothering her and her husband:
"We are happily retired, and my husband & I know that we need to talk financial specifics with our adult children, but we seem to keep putting it off. And, yes, we know that *not* doing this will complicate their lives if we were to both die without doing it. So I would love to see a post & comments from others about how to handle this important conversation — when, how, what specifics and how much to disclose."
I have written about the need for spouses or life partners to share financial details, duties, and information with each other. Since one half of a couple usually handles most of the money stuff, the other person could be in a terrible bind after the death or incapacitation of the "financial" person. If you haven't read one of the earlier posts, please start with Protecting your Partner's Financial Well-Being. The subject is much too important to put off until another day.
For this post I am going to shift my focus to the question asked by the reader. What about a couple's offspring: their adult children, through birth, adoption, or a blended family...what financial details should be shared with them? When? How? How specific? That is a great question I have not dealt with before. But, I have no fear in writing about it since I know your comments will be the ultimate guide.
From my perspective, I think the answer hinges on a few key realities:
1) How is your relationship with your grown children? (GC)
This may be the toughest question to answer because it is really asking about trust. Do you believe your adult children will do what is best for you if any of them have to handle your finances? Can you have productive conversations with your adult children about subjects other than finances?
2) What are their financial situations at the moment and long term?
I would guess the financial stability of an adult child could enter into your consideration of how much you feel like sharing. Is there a chance you will be using some of your nest egg to help your children sooner rather than later? If so, they would probably feel more comfortable accepting your help if they knew you wouldn't be hurting your own retirement. That would require at least enough of an overview to raise their comfort level.
3) How old are your GC?
Personally, I'd share less information with a GC in his or her 20's or early 30's than someone older. Why? A younger adult has to learn and experience some of the basics of financial decision making before being able to fully understand more complex arrangements. Of course, this really depends on the maturity level of the person in question. There are some young adults I'd trust to understand what I was explaining or how to handle my finances if I were unable to. But, that may be the exception.
4) Should any or all of the GC be actively involved in your finances now?
If yes, then certainly that person needs to know what you are working with. If you think you or your partner's ability to handle your investments and basic financial duties may be slipping, the amount you share could be substantial. If you are doing just fine, then there is no reason to put that extra responsibility on an adult child yet. Share enough to make him or her feel trusted and part of the long term plan, but don't cede control too early.
The legal paperwork involved in having someone execute your desires and to protect you should be in place, even if you choose not to share too many details right now. Power of Attorney and Living Will documents are usually the foundations of a solid financial plan. They give someone the legal right to manage your affairs and make decisions about your care before your death. Both can be modified or terminated at any time by you.
Having a Will prepared for after death is also crucial to avoid some probate issues or have a court decide how your financial affairs will be handled. With these in force, your grown children will need to have the details about not only what you want to happen but what resources you have to make all that happen.
Now, your turn. If you have faced the questions posed by the reader please tell us how you handled this situation. If you have grown children but haven't shared much, what is your thinking? Do you plan on bringing them into the loop in the future?
This is a fascinating area for discussion. It impacts you, your adult children, their children, your relatives' children..all sorts of folks will be impacted by how this situation is handled. I am really hoping for all sorts of feedback and guidance.
And, if this post raises some additional questions in your mind, leave them as comments and we will see what we can do together to come to some answers.