August 6, 2018

Financial Sharing With Adult Children: How Much and When?


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.



30 comments:

  1. I have no kids and no partner. So, each year, I write down a list of my bank accounts, safe deposit boxes and other important details and put that in an envelope, seal it and put it in my safe at home. My sister has access to my safe. So, if somethinh happens to me she will know what to do.

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    1. I'm glad you responded. Even though the question from the reader involved adult children we all must have someone who will handle things after our passing.

      One question: do you have Power of Attorney and Health Directive documents prepared in case your sister has to make decisions on your care will you are still among us?

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  2. We only have the one child so things are not as complicated in that regard. While we have not gone over all specifics she is pretty aware of our situation in a macro sense. I need to put all the accounts and login data together for her to make it as easy for her as possible if anything sudden happened to Deb and I. Fortunately we are on good terms and she has her head screwed on well financially; we don't appear to have the same issues that many might with profligate kids, drug issues, and so on.

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    1. Putting together the essential log in information and passwords are very important to your daughter's ability to do what needs to be done. Congrats on raising a young woman in whom you have confidence to make the best choices when the time comes.

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  3. This is a huge topic for my husband and I now. We have just one son and, because of recent experiences with this with our parents, we have now shared everything with him. He has complete access to all of our accounts and all information. That is the easy part. We trust him completely. The situation with our parents has not been so smooth. My husband's parents loaned my husband's brother approximately $45,000 ten years ago. The loan was never paid back and there is nothing in writing. They did not need the money paid back and just let it go. Whenever my husband brought it up they changed the subject and said it would all work out in the end. Well, my mother-in-law passed away 9 months ago, and my father-in-law has dementia. My brother-in-law says the money is nobody's business. He will not discuss it or consider paying it back to his dad or the estate. Because it happened over 10 years ago and there is nothing in writing, we have no way to get it back. So many hard feelings that will never be repaired all because my in-laws refused to talk about it and refused to ask for the money back. There are so many more issues all because of this. My advice is to talk now and to get everything out there, because before you know it, it is too late.

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    1. I'm sorry about your situation. You are absolutely correct: if it had been dealt with years ago you and your husband wouldn't be in this uncomfortable situation has has harmed relationships.

      At this point all you can really do is caulk it up to a lesson learned. You are confident it will not be repeated by your son in some form because he has seen up close what happens when financial issues are left unresolved.

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  4. This is an interesting topic. We have 2 daughters, one that is very responsible with money and one that is less so. The “less responsible” daughter is getting better as she moves into her early 30s but even she’d admit she’s not the best with money. Our intention would be to give the “more responsible” daughter more control as the need arises though so far we are okay on that front, perhaps as we age into our 70s we’ll have to give that some thought.

    We aren’t there yet but obviously at some point we will need to give power of attorney for financial and medical decisions to someone. Right now we have set that up for each other but for sure it will come to head when one of us passes away if not before then. We do have wills and again we are each other's executor but if we are both gone then our "more responsible" daughter is the executor (with instructions to consult and inform the non-executor daughter).

    To the annoyance of my wife, I’ve always been fairly open about our finances – more open than she thinks I should be anyway. Personally I think we get ourselves into more trouble by keeping silent than we do by being open. If we have a financial adviser we are much more open to them than we are to those nearest and dearest to us. Why is that? I guess we think if we talk about money with someone there’s only two outcomes: We’ll feel inadequate (because they have more) or we’ll make them feel inadequate (and we’ll look cheap).

    When we talk about money the emotional stakes are high so we don’t. That’s why it remains the last taboo. Many would rather talk about their sex lives than about money. We probably should try and get over that reluctance to talk about money.

    One thing I have been reading lately is that as we age we get more confident in our ability to manage and invest our money but research says that confidence is misplaced and we actually get worse, though we don’t realize it, especially once we get past the age of 70. Of course, we have been in a rising market for 10 years now so people are confident in their ability to invest well, this belief may be shaken when the next downturn comes as it inevitably will.

    This actually makes a case for buying guaranteed products like annuities as you age and it simplifies financial decisions for us and others going forward. Few people actually do this as they want to maintain the illusion of control plus who trusts insurance companies anyway? One thing to keep in mind is that annuities are guaranteed by government though limits vary depending on where you live.

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    1. What a nicely detailed recap of your situation. Like you we have two daughters. One is very comfortable with finances, budgeting, and being a good steward of money. The younger daughter is quickly catching up with her sister in this regard. She is comfortable talking about finances and has started to save for a house down payment and make smart retirement account decisions.

      Recently, Betty and I have made both daughters co-beneficiaries of our investment accounts. We wanted to avoid any probate issues if we both go together. All that is left is to retitle our home so both are on the title, too. We could have put everything in a trust but the cost didn't seem worth it since we trust both girls to do what is best.

      For our Power of Attorney and Living Wills we did designate one daughter as being in first position and the second as her backup. The type of decisions that might have to be made in those situations seemed to lend itself to have one person have the final say. Our will splits everything eventually between them and/or their offspring.

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    2. I have some questions about adding your daughters name to the house. We can't predict the future. If one of your daughters is sued or has to file for bankruptcy this would be considered their asset. I'm not a lawyer, but I would consult with one before I made that decision.

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    3. Good point, Donna. Yes, a Real Estate lawyer would be part of the process. If it turns out not to be a good plan, we will come up with an alternative.

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  5. I have been fortunate in that my parents shared all this info with my brother and I including making us co-trustees on their revocable trust once they were in their 80s. They knew we would make caring decisions on their part and also work together to manage their money. We have been equally open with our 2 sons and feel fortunate that we totally trust them to not misuse the info and also to work together if the time comes that they need to manage our finances for us. They both have durable power of attorney and health care power of attorney too. However it would be different if we didn't trust them to make good decisions on our behalf or if we knew they struggled with mental health or addiction issues. We are faced with a challenge though in that my 92 year old FIL has let his ID lapse and now there are problems adding my husband to his checking account since he no longer wants to deal with it. Hopefully his birth certificate, etc. can be found and he can be taken to the DMV to get an official ID so the bank will make changes.

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    1. The checking account issue is important. Another option? Can your FIL close his account and then your husband open a new one in just his name, one that is used exclusively to handle your FIL's accounts? Sometimes banks will accept bills that have the person's name and address as proof of identity if that is needed to close an account.

      The goods news is the trust you and your sons have in this area and that you have all your paperwork in order.

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  6. We put everything into a trust a number of years ago. The tax implications seem to make it the best choice so Andrew actually receives what we have worked for! We have been completely transparent with our only son about our money and he with us about his. We all go over details once a year, making sure we all have passwords, safe deposit box keys,etc. Mostly our son advises us to spend more and leave him less! LOL! We are frugal by nature so we’re not exactly blowing through our savings at a fast rate. We became debt free long time ago. He has a decent state retirement up ahead and savings of his own. Finances seems to be a hot point with so many, but it’s so important to not put head in the sand especially when you have hard earned funds,savings,IRA’s,property etc and it will need to be disbursed. Facts of life aren’t always fun but the peace of mind of dealing with it make it worthwhile.

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    1. Andrew is like our daughters: they say spend more and enjoy what we worked so hard to save. And, like you, we just aren't comfortable with the idea of not helping out the next generation with a decent inheritance.

      18 years of retirement and we are comfortable with a lifestyle that makes us happy without causing us to worry about what may lie ahead because we overspent.

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  7. I am an only child and my parents added me to all their bank accounts after a health scare 4 years ago. Last year they also completed a Lady Bird Deed so that their house will not have to go thru probate and will be in my name after they are deceased. They still have complete control and can sell if they wish. ( you might want to see if that is an option in your state). There have been several health issues recently and I was able to pay their bills for them. My mother has a living will and health proxy naming me but my father hasn't completed one yet. He is 87 and for some reason doesn't want to complete them. Likewise my parents are named as the primary beneficiaries of all my accounts and in my will. I am concerned that at 63 I have no one that I would trust with access to my financial or healthcare decisions.

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    1. I have never heard of a Lady Bird Deed. I learned it is only available in Florida, Michigan, and Texas. But, a Transfer-on-Death deed is legal in Arizona and is something I should look into.

      Your concern that you have no one you trust like your parents do with you is a valid one. If there is no other family/relatives, you are pretty much left with the option of using a third party service to manage your affairs. Since that is a big deal, I'd suggest you start now to find a person or organization that you can trust with such a responsibility.

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  8. Well, we have four children between us. We have worked many hours to create a binder with all financial information included. Also included are health directives. We are on the younger side so we’re advised NOT to put property in a trust. The possibility of divorced spouses reaping the benefits of our hard earned money was one reason. One daughter knows where to find our binder...

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    1. You are organized and have given your kids what they need to make sense of it all. They will appreciate your thoroughness when the time comes.

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  9. We have durable powers of attorney, durable powers of attorney for health care and advanced directives. Our two daughters have copies of those. We have a will, too. They know what's in it and where to find the originals if we should both die at the same time. One of our daughters, an attorney who lives nearby, has been given durable power of attorney, and the other has been given durable power of attorney for healthcare because she's more knowledgeable about some health issues I have. We will be changing that and naming our attorney daughter for both. That's not due to any falling out or lack of trust, but rather is because one daughter is moving further away from us. It just made sense for the one closer to us to have that power.

    Yesterday, I entered all my passwords into a password manager, and gave the attorney daughter the main password. I'll be giving it to the other daughter, too, when she visits this week. My husband is behind me a bit in entering his passwords, but I'll keep after him.

    I am currently exploring what can or should be done to allow our brokers to communicate to our daughters if we have begun making unsafe financial decisions. As someone who for many years wrote for a market-related website, I sometimes heard from people who were making unsafe decisions that could and sometimes did result in large and unfortunate losses.
    As time goes on, we get more and more specific about what we have and where things are.

    Because one of our grandchildren was born with multiple inherited difficulties that threatened her life, we stepped in with financial support that allowed our daughter to quit her job and be with her child during multiple hospitalizations and to help guide needed physical, occupational, speech, and nutritional therapies. We have sometimes wondered if we should make some adjustment to our daughters' inheritances to take account of that financial support, as our attorney daughter has never sought or received any financial help. Ultimately, we decided on an equal split. Our attorney daughter has more children than the other, so when the proceeds from the sale of the house are split among the grandchildren, as our will dictates, her children, en masse, will be receiving a larger proportion of the house's proceeds. We felt it evened out, but it's never an easy decision, is it?

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    1. Besides providing a textbook case on how to prepare your adult children, you raise an interesting point: equal/unequal balance of assets. That is a tricky one.

      One of our daughters is unlikely to marry or have children but is very comfortable being an aunt to her sister's children. Therein lies the rub. We have pledged a certain amount to the three grandchildren's college funds. Being without child, that means the younger daughter will see a portion of the eventual estate divided a bit unfairly. She doesn't mind at all, but we felt we should do something to balance the scales a little.

      So, we are giving her a certain sum to help her with the down payment on a house. That total dollar amount isn't an exact match but seems fair and will be very helpful to her.

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  10. Even though I wrote a book, I forgot to mention a situation we encountered with my mother-in-law. She was brought to another state for specialized care. When my husband and his brother grew alarmed at what was going on, they were told that my brother-in-laws' powers of attorney (general and for healthcare) did not have to be honored because they were written in another state. They finally convinced the facility to release her to be transported back to our state, but they worried that convincing them was going to require a legal fight, one that would have had her dying in another state before her release could be achieved.

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    1. Wow, there is a complication that wouldn't have occured to me. Good to know that could be an issue. Thanks, Linda.

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  11. I have four children, one daughter, who is married, and three sons. I have set up four irrevocable trusts for them, and will be putting money I inherited in the trusts. I can live on my social security and state retirement rather easily if my healthcare costs do not skyrocket. That is why I am continuing to work until I can COBRA for three years, then qualify for Medicare. My daughter is financially responsible. My sons are idiots, bless their hearts. I can say that, they are mine....lol. I do not trust my son-in-law because I used to do a lot of divorce work, I am divorced, and well, it goes with the turf. The trusts are set up so that they can access them when they are 62. I figure thirty years to grow will help all of them, and she lives in another state, and it helps her not to be able to access it until 62, in case of divorce, as well as my sons if and when they marry. My daughter knows all my assets, bank accounts, land, and is the executor of my will. I did put my youngest son over my healthcare because he will not pull the plug too quickly....lol.

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    1. I like both your straightforward approach to managing your financial sharing along with your sense of humor.

      I am sure you had specific reasons, but I wonder why you went with irrevocable instead of revocable trusts.

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    2. Because my idiot sons (one in particular) would forever aggravate me to change it, or give the the money early. This way I can smile sweetly and say, sorry (although there are provisions that do give me some leeway, they just do not know that...lol)

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  12. My mother ended up almost totally blind from macular degeneration. She refused to put her assets into trusts though she would have had complete control as she needed to control whatever she could. It wasn't that she didn't trust us--my sister and I did all her banking and investments for her. She died in 2001--just before the first inheritance tax decrease. We paid the taxes in the beginning of 2003. My sister and I rationalized--it's going for America so....6 weeks later Bush declared war in Iraq. Maybe selfishly I always believed that because my mother lived in the Queens--Nassau county border; I lived in Manhattan and she died a month after 9/11, and everything doing with estates was much more complicated than normal (death fatigue at banks etc) we should have been exempt from paying as much as we did---she wasn't rich, rich. My mother never touched her IRA except for the RMD--and as we have to take it in annuities it's a wonderful gift that comes every year. I don't know why that means so much to me as my parents were uber generous and had given us much when they were alive. One more thing--adopted children shouldn't be separated out. Children are children and in this day people should know that adoptees have all the rights of natural children. I don't know why that one always hurts a bit.

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    1. Thanks for you comment about adopted children.It wouldn't have occurred to me that could be an issue, but I am sure you are right.

      Your mom didn't use trusts at the end but it sounds as if she and your dad took care of you well.

      Now with the "death tax" threshold set so high, most of us don't have any worries in that area.

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  13. Thank-you for writing about this topic, Bob. I am embarrassed to admit that I have had my head firmly in the sand on this. I have no excuse except that I still feel too young to have to think about such things (which of course is not true). We have a blended family, with 4 of the 5 adult children being sensible about and competent with money. When my husband’s first wife passed away two years ago, her financial affairs were a mess, leaving my two stepchildren to struggle with it all on top of grieving the death of their mom. So I really should know better than to put things off.

    Jude

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    1. It is a necessary evil, Jude. Getting things in order now and explaining what is happening to those who could be impacted is the loving thing to do.

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