Ultimately, children must understand how their parents stand financially and how they want their affairs handled after they die. An important conversation is called for – and the key to a successful talk is compassion and understanding.
Children often don’t have a clue about their parents’ finances. And that’s fine up to a point. Why should a 16-year-old care about dad’s credit score or how the investment portfolio is performing?
But as everyone grows older and, parents settle into retirement, the kids will eventually realize they still know practically nothing about how mom and dad are fixed financially or what their wishes are after they die.
And so comes the time to have The Conversation about the parents’ finances. It’s one many people put off too long, because it can be very tricky and leave those involved with the wrong impression.
“People don’t like to be asked about this kind of stuff and they don’t take it well,” observed Lynne Butler, who has been practicing estate law for 30 years in St. John’s, NL.
“They often think you’re asking because you want to get your hands on things and it’s role reversal. People don’t always think it’s their kids’ business what they have, and nobody wants to think about (the fact that) one day they will need to know.”
Yet that knowledge is crucial in order to avoid a really unpleasant scene down the road.
“They have to understand it’s a part of life,” said Renée Verret, a certified financial planner based in Oakville, Ont.
“This is not a taboo topic to discuss.”
Both Butler and Verret agree that the key to a successful conversation about parents’ finances comes down to how the topic is brought up.
Sometimes, the opening can be made at the time of a funeral for a close friend or relative.
“In this age, they’re often losing friends,” said Verret.
“They have friends or family recently returned from a funeral, that’s an easy kind of thing, you know, how was it? Was the service something that you would like?. What would you do differently? What would you like done? It’s one small piece but it’s a little opening door that allows you to kind of go in and check it out.”
Maybe you could point to a celebrity in the news that just lost a parent. Or personalize it; tell them you and your spouse have just bought life insurance policies and that can dovetail into a wider discussion of parental finances. And ask the big questions.
Butler said an easy first question could be “do you have a will?”
“Am I the one who is going to be the executor, do I have to look after things? Where is your will? Whose name is on the house? Those things would obviously flow from breaking the ice, from a non-threatening way of saying, ‘look what just happened. If this happened to you, where would I start?”
Another important question about the will is whether, the parent wrote it up through an online will kit or went through a lawyer’s office.
Butler advises people to spend a few hundred dollars and do the will with a lawyer because a major mistake people make is almost always thinking their affairs are simple.
They’re not, and “people don’t understand how the law applies to them,” she noted.
“For example, a fellow who was married but living common law with somebody else. In his mind, it’s clear who his, quote, wife is. He’s thinking of the woman that he’s living with. And there are kids in the house. But legally who would be entitled to what if he didn’t leave a will?”
The children will also need to get up speed on whether they have a safety deposit box, bank account information, and important contact information, including doctors, financial advisor and the insurance agent.
“You only want to do this once and not do it while you’re dealing with the loss of your parents,” added Verret.
Then, there’s another tricky question to be handled with extreme care: where is everything?
“Just imagine throwing that one at your parents: by the way where is the key to the vault, mom? That has to be in context,” said Butler.
Probably the best bit of advice for dealing with a potentially difficult talk about finances with your parents is this: put yourself in their shoes.
“I would say do it as kindly and compassionately and patiently as possible,” said Butler.
“It’s important to understand this can be frightening and upsetting to the parents – try to think how you would feel in that position and handle it with kid gloves.”