Inheritance Money: Should You Talk to Your Parents About Theirs?Submitted by Castlebar Asset Management on August 27th, 2018
Do you know how much money the baby boomer generation is expected to pass down to their adult children over the coming decades?
If you guessed somewhere in the billions… guess again.
Experts estimate $30 trillion dollars’ worth of wealth will pass from your parent’s generation onto yours in the near future. That could mean seeing some inheritance money moving into your own nest egg.
But at the same time, plenty of baby boomers are behind on retirement savings and don’t have enough wealth to last the rest of their own lives. Others who saved diligently over their working careers may see those assets eaten away as longevity increases and long-term care becomes critical.
Here’s what all this means for you: your parents may be poised to provide you with a considerable some of inheritance money. Or you may be entirely on your own.
And it’s important that you talk openly with your parents to understand where on the spectrum they fall so you can take care of your own financial planning.
Why You Need to Talk Wealth with Your Aging Parents
Of course, this can feel really awkward to think about -- let alone do. But again, it’s important because without the facts, you’re left to complete your own financial plan with insufficient data.
You’re likely working hard to save for your own retirement while you also fund big financial goals like sending your kids to college or finding and being able to buy your forever home.
You may feel like you have to be careful about how much you spend today on things like vacations or little luxuries in order to meet these obligations -- and you may not need to, depending on what your parents’ plans are for their money.
It’s not about being greedy or selfish. It’s about being informed and aware.
(Not to mention, opening the conversation may also reveal that your parents need your help, which they might not ask on their own -- and that may need to be part of your own financial plan, too.)
That being said, how you bring up the subject certainly matters. The right way to broach the topic will depend on your relationship with your parents, your family dynamics, and whether or not they’ve ever volunteered financial information before.
Here are a few things to consider, and tips to get you started so you can have some important conversations about your parents wealth and how it may or may not impact your own.
Starting the Conversation on the Taboo Topic of Inheritance Money
Talking with your parents about inheritance money doesn’t mean going up to them and asking, “will you leave me money?” It means having a conversation around the question of, “what are your plans for your wealth?”
Again, you’re not asking for anything except the information required to complete your own planning. And you can reference that as a way to bring the subject up in a way that doesn’t leave you feel like you’re being greedy, bratty, or selfish.
For example, you might share that you recently met with your financial advisor and looked at projections that showed whether or not you were on track to meet your financial goals and fund your retirement.
You can then explain that this got you thinking about their retirement planning, and what other financial goals they might have. This might be enough to get your parents talking, or you may need to ask more direct questions.
You could also follow up your opening with something like, “our financial advisor asked if we expected inheritance money, and I didn’t know what to say. I certainly don’t expect it, but I am curious what your plans are if it will impact our financial situation some day.”
Or, open the conversation by saying something along the lines of, “Our financial planner suggested we chat with your about your retirement plan, and make sure you feel comfortable and where you need to be. We know you sacrificed so much for us growing up, and we want to help if you need it -- but we need to plan for it if that’s the case.”
No matter how you bring up the subject, be genuine and sincere. Don’t lie or make things up to push your parents into talking about certain topics.
What If Your Parents Want to Leave You Inheritance Money -- But They Feel They Can’t?
Something that may come up in these conversations is the fact that your parents may want to help you financially, either while they’re still alive or by leaving some amount of wealth to you after they pass, but feel they can’t.
How they feel about it and the actual reality of their situation may be two different things. If your discussions lead to this point, suggest they work with a financial planner to review their situation. A financial planner can take a look at their finances and talk to them about strategies to reach their goals, which may include leaving a legacy (no matter how big or small).
If they’re not optimizing their cash flow or investments today, a planner could suggest adjustments that will increase their nest egg. That, in turn, could also increase their chances of being able to provide inheritance money for their children.
Making simple changes, like the order they withdraw from retirement, investment, and savings accounts to fund their lifestyle, could save them on taxes. Making sure their portfolio is allocated efficiently could mean saving money on fees.
In both cases, that leads to more wealth that stays with them -- or gets passed to you.
No matter what the outcome of your conversation, you need to be proactive about having these talks so your family can come together and understand mutual goals and planning needs.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.