Family Finances: To Discuss or Not To Discuss?

by Saul Ewing LLP
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A recent survey reveals some discouraging trends on the financial front. As reported by Financial Advisor, a survey by MFS Investment Management shows that more than 2 out of 3 financial advisors say their baby boomer clients do not include their adult children in family finance discussions. The survey also reports that 60% of investors say their financial advisor has never discussed family wealth management with them. A summary of the survey can be found here:

http://www.fa-mag.com/news/family-wealth-conversations-are-not-happening–survey-finds-14492.html

This is troubling because intra-familial communication of financial information goes a long way to bridging the gap when there is a death or incapacity. I can’t tell you how extremely helpful it is when the surviving spouse and children have knowledge about a deceased or incapacitated person’s financial affairs. When the family does not know financial information such as the nature of assets, where they are located, and who the advisors, they are at a distinct disadvantage. It is like trying to find your way through a maze wearing a blindfold: there are a lot of wrong turns, running around in circels, and bumping into walls. This only complicates the advisor’s role, adds time and expense to the process, and alienate family members. Piled on top of this is each family member’s emotional experience of dealing with the death or incapacity. In my view, an added bonus of intra-familial financial communication goes a long way to reducing friction between family members.

Clients often ask when signing the Will, ”Should I talk to my children about this?” This is a great question and one that warrants discussion, whether the client asks or not. Unless there are extenuating circumstances, I encourage clients who have a good relationship with their adult children to have an open and frank discussion about their finances. Not for the purpose of setting expectations for a future inheritance but rather to help family members navigate the difficulties that arise when there is a death or a incapacity. This rule of thumb applies to spouses as well, especially those who never took an active role in handling finances during the marriage.

I usually tell the client that an easy way to broach what could be a difficult subject is to blame me. At the next family gathering, the client should tell the family, “I met with an estate planning attorney who wants me to review a few matters with you.” This is an entree to tell the family the information that is invaluable to them, such as names of the family advisors, the general (or specific) nature of the balance sheet and income statement, any life insurance, health, and long term care policies and where they are kept, and specific wishes relating to end of life decisions.

Unless the circumstances suggest otherwise, advisors should encourage their clients to discuss financial matters with their spouse and adult children. The extent of the discussion and disclosure should be up to the client, but with enough financial information in the hands of other family members, a death or incapacity will not exacerbate an already difficult process.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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