Many people worry about what will happen to their parents as they age, and that’s before you add their finances (and yours) into the mix. It’s uncomfortable think about aging and death, and talking about money can be difficult to boot. The difficulty of these conversations makes them easy to put off, which can lead to wide ranging consequences down the road.
At Quorum, we believe truly comprehensive financial planning should involve multiple generations, and we can help you tee up the conversations to get everyone on the same page. Ultimately, this approach can help clients support their parents when needed, prepare their children, and protect their own wealth along the way.
What is multi-generational planning?
Typically, we start working with clients somewhere in the middle of their career journey. We’ll call this the middle generation. Often, this middle generation has children and is already thinking about how to balance retirement and their own financial goals with the expense of raising a child.
What we don’t see as frequently is a middle generation plan for supporting parents in old age. In some cases, it’s because this grandparent generation has done their own financial planning and doesn’t need financial assistance. But we also see a tendency among older Americans to avoid talking about money. (A recent survey showed just 41% of Baby Boomers grew up in families that discussed money.)
Because of this, it’s not uncommon for clients to come to us with questions about sorting through their parents’ estate. On the one hand, sorting through financial complexities when you’re already dealing with the emotion of a parent’s death can be incredibly difficult. On the other hand, seeing how important financial and estate planning is firsthand can help jump start a conversation with other members of the grandparent generation (and help inspire the middle generation to start their own planning).
This applies to the younger generation, too. While many parents teach their children about personal finance as they’re growing up, more complex conversations about wealth rarely enter the picture. For instance, if your child is a successor trustee on your family trust, what does that actually mean for them, their day-to-day finances, and their plans for the future?
How can a financial advisor help?
Talking about money can be difficult, full stop. It tends to get more complicated when you add family dynamics into the mix. A good financial advisor can help facilitate these conversations.
At Quorum, we work closely with clients to understand their financial relationship to their parents and children, as well as their personal relationship. This helps us pinpoint which financial discussions need to be had (if any) and what boundaries need to exist in those conversations.
Specifically: We always respect client privacy and treat each household (e.g. middle generation and younger generation) separately. That means we’ll never discuss your information with a family member unless specifically instructed (and permitted) to do so.
Regardless of what information we share among family members, working with multiple members of a family allows us to see the bigger picture and we may be able to spot tax, estate, and legacy planning opportunities.
At Quorum, this approach may also allow us to offer better pricing across the households.
Start improving your family finances
The first step to any kind of multigenerational planning is usually an audit of financial accounts and any estate planning you may have in place. This can help us spot any common mistakes or oversights that could cause problems in the future (and for future generations).
Many of our clients in California have trusts, for example, due to the state’s rules around property transfer and probate. And yet, we frequently see people forget to place their assets into the trusts. In other words, you may need to tackle some paperwork. Each bank and financial institution has a different process for this.
It’s also important to know which accounts to place in trust and which should remain separate. For instance, naming a trust as the beneficiary to an IRA if your spouse is still alive may create complications for them and/or increase the amount of tax they pay on the inheritance.
Working with a financial advisor on a multi-generational audit can shine a light on these and other potential hiccups and help you fix them before they become actual problems.
To learn more about how we may be able to help you engage your parents, children, and other family members on a more comprehensive family financial plan, reach out to our team.
