Money. Depending on your family dynamics, it can be a blessing or a curse—no matter how much or how little you have to call your own. That’s especially true when it comes time to hand over the keys to your kingdom to the next generation. When that transition is managed carefully over time, it can be a natural, stress-free evolution. If there’s limited communication, secrecy, or just no plan at all, it can cause upset, bitterness, and unwanted financial consequences for Mom, Dad, and their adult children.
I spent yesterday afternoon working with Sarah. In her early 50s, Sarah is every aging parent’s dream financial trustee. She’s smart and educated, and she’s thoughtful and diligent about “dotting the i’s and crossing the t’s” when it comes to her mother’s finances. That thrills me because her mother Marion is one of my dearest clients. Sarah and my mission yesterday was to get all of her mother’s accounts connected to our eMoney platform so we can seamlessly work together to monitor and manage cash flow, bills, and investments. In less than an hour, we linked the accounts, agreed to a 6-month plan, and had our next meeting scheduled.
It’s not always so simple. First, not every parent is fortunate enough to have a “wise child” like Sarah to help. Second, not every parent is ready and willing to hand over the keys—even when the transition is long overdue.
Vicky and Rich are perfect examples of what not to do. Now in their 80s, the couple’s three adult children are all clueless about whether Mom and Dad have enough money to fund the remainder of their retirement—or not. They’ve named their son Josh as the executor of their estate, but they’re keeping the numbers a secret even from him. Josh is stressed because he has no idea where they stand financially or if he and his siblings may need to help them in the future. Vicky and Rich are stressed because they feel like Josh is invading their privacy every time he asks about money. My question to them is always the same: “If you don’t trust him with the keys to your kingdom when you’re alive and well, why should you trust him when you’re in a coma?”
Variations on the theme are endless. Melinda puts up appearances of being financially flush, but suddenly she’s out of assets and is ashamed of having to turn to her kids to help fund her remaining (and less-than-flush) “golden years.” Elizabeth notices that her dad, who has dementia, is suddenly writing large checks to his live-in caregiver (thank goodness she has that visibility!). Luci keeps urging her parents to “spend more and enjoy life,” but they (and I, as their advisor) know they’re wisely spending what they can afford.
Handing over the keys to your kingdom can be scary and humbling, and it’s hardly ever easy. But the process is better for everyone when the truth and the facts are out on the table. Take these three steps to ease everyone’s mind in the future—and the sooner, the better!
Name a financial trustee.
If you have adult children, begin by doing an honest, thorough assessment to determine who should act as your fiduciary. Can you trust them with your money? Do they have the character, the skills, and the time to work in your best financial interest as you age? A child is usually the ideal fiduciary, but you may find that a sister, best friend, or other relative is more suited to the task. Choose intentionally and begin the transition long before it seems mandatory.
Communicate and educate.
Once you’ve identified your “person,” communicate your values, so they have a deep understanding of what matters to you. Knowledge and insight are vital if and when they need to step in to make financial decisions in your place. Discuss how to recognize any red flags that mean you're not acting in your own best interest. Be clear about the details with your trustee and with your financial advisor to be sure everyone is on the same page.
Next, educate your trustee on the technical aspects of your financial life. Create an inventory of your assets, including bank, investment, and credit card accounts; passwords; insurance policies; safe deposit box information (note that you must visit the bank in person together to add your trustee to your account and ensure access); contact information for your financial advisor and estate attorney; and estate planning documents, including your Healthcare Power of Attorney and Durable Power of Attorney (if these aren’t already in place, make this a top priority). And work with your financial advisor to make your personal documents available in a secure vault like our eMoney platform.
Coordinate your team.
With your trusted person on board, it’s time to arrange a meeting with your entire team, including your trustee, your financial advisor, and all stakeholders involved. Your adult children are a given, but it’s important to include any other beneficiaries of your estate as well. Taking the time to be sure everyone understands your wishes and is clear on who is in charge of what will make things easier for everyone—today and in the future.
The great news is that trusting the right person with the future of your finances can be tremendously freeing. When Marion appointed her daughter as her trustee, she told me how relieved she was. “If I’m forgetting words, I’m sure I’m forgetting to pay some bill or another. I worry about it all the time!” she said. “Now, Sarah is making sure I don’t make mistakes—big or little. What a relief!” Whether you’re 60 or 102, now is the time to hand over those keys and get on track toward an easier, less stressful tomorrow.