Talking finance - and inheritance: post from family lawyers

Guest post regarding finance and inheritance from family lawyers.

Financial conversations are important, but not easy. New research reveals not only the peace of mind created when parents and children discuss inheritance, care needs and retirement planning, but also the struggle to have the conversation in the first place.

According to an Intra- Family Generational Finance Study from Fidelity Investments, the fault lies on both sides. It reveals that while more than nine in 10 (94%) US adult children and their parents agree it is important to have frank conversations about wills and estate planning, care needs or covering retirement expenses, there are significant barriers to even starting these discussions within families.

Why people don’t talk

The top barrier, noted by 30% of parents, is they don’t want their adult children to overly rely on a potential inheritance. And for adult children, 40% say that the top barrier is that they feel it is none of their business to ask their parents about these topics.

The timing of these discussions is also a barrier, reveals the study. In fact, only one in three (34%) parents and their children agree on the best time. Parents are more likely to cite when they near or enter retirement (37%) as the right time, while children indicate that they’d like to have a conversation before their parents retire or have health issues (37%).

Financial miscommunication

Highlighting a vast disconnect between parents and children, the study reveals that 97% of parents and children disagree on whether a child will take care of his or her parents if they become ill.

Major miscommunication also exists when discussing inheritance and estate planning. In fact, children are underestimating the value of their parent’s estate by more than $100,000, on average. Additionally, neither side is effectively communicating about retirement readiness. As a result, one-quarter (24%) of children believe they will have to help their parents financially in retirement, while nearly all (97%) of parents say they will not need help.

The impact of the disconnect

The lack of discussion is having a big impact on families, according to Kathleen A. Murphy, president of Personal Investing at Fidelity Investments.

“Given the economic pressures facing families today, it’s troubling that detailed conversations are not happening, especially among those in the sandwich generation who may be grappling with competing financial priorities ranging from planning for their own retirement and paying for a child’s college education to dealing with eldercare, estate planning and retirement challenges with their parents,” she said.

“Whether it’s a parent facing a shortfall in retirement income or an adult child weighing the tax implications of an inheritance, too often discussing these issues is considered taboo within families, but real emotional and financial consequences emerge when such conversations don’t happen or lack sufficient depth,” she warned.

Benefits of talking about the future

According to Fidelity, conversations about estate planning have an overwhelmingly positive impact. The study found that the peace of mind of parents jumps from 61% to 91% when comparing those parents who have not had detailed conversations with their adult children versus those who have.

On top of this, parents who have had detailed conversations with their adult children feel significantly more at ease about their children’s financial future – 68% compared to only 30% among those who have not had detailed conversations.

This guest post is courtesy of Gibson Kerr Family Law Solicitors in Edinburgh: http://www.gibsonkerr.co.uk/. Contact Fiona Rasmusen and their other solicitors for expert family law and estate planning advice.