Family Financial Planning: How to Start the Conversation

Most of us would rather avoid talking to our families about aging, end-of-life care, inheritance and estate planning—not to mention admitting that the time may be coming to make these decisions.

The money talk is one of the best and most practical gifts a family can share, and it’s crucial to ensuring your plans will be carried out as you’ve intended.

Why Families Should (but Often Don't) Share Their Financial Plans

The reasons aging parents and their adult children avoid financial discussions likely mirror each other. You might be surprised how similar your hesitation and discomfort might be.

Reframe the Discussion: Family Estate Planning Is a Gift

Rather than looking at these conversations with dread, think of the process as an act of love and generosity. Having critical conversations now can prepare your family for what's to come, which can help reduce anxiety during a time of crisis or grief.

Transferring money from one generation to another isn't just for wealthy families, either. It's important for every family to understand wishes, expectations and plans to keep the family's legacy—and relationships—intact.

Set a Date: Organize a Meeting to Discuss Family Finances

You and your family can find countless reasons to avoid sitting down to talk. Everyone's busy. It's hard to get everyone in the same place. It'll ruin Thanksgiving. It's unsettling to think about a loved one’s illness and death.

But coming together at a specified time—ideally outside of regular family gatherings or holidays—gives everyone a chance to be prepared. Family members can bring questions, concerns and requests and hopefully avoid making decisions during emotional times.

• Minimize surprises. Your family will know your wishes and expectations.

• Reduce confusion. Family members will learn what they'll need and where to find important documents.

• Decrease disagreements. When everyone has the same information, you can reduce the likelihood that family members find themselves at odds.

Stay on Script: Tips for Guiding the Family Money Conversation

Once you get everyone in the room, it’s important to stick to your agenda. You should also consider the dynamics of your family; you may find that a neutral party (an estate planning attorney, doctor or financial advisor) may be a helpful participant in the discussion.

• State your purpose. Tell your family that you're ready to discuss important matters related to your finances, estate plan, medical decisions and other final wishes that will affect the whole family.

• Share your plans. Explain your financial, estate and medical decisions and how you came to those conclusions. You could share the experiences (positive and negative) of other family members or friends.

• Review documents and roles. Hand out important financial, estate and medical documents. Identify which people (and, if appropriate, why) you've chosen to carry out your wishes. Explain each role—executor, trustee, power of attorney, health care agents, etc.—and provide all the paperwork required.

• Ask for commitment. Request that the family commit to supporting and carrying out your wishes. This process may seem overly formal, but each step is important. Remember, if something happens to you, this meeting can provide all the information your family needs to make decisions.

Still Planning? Choose the Right People

As you prepare for your family's financial discussion, it's time to finalize your "personnel" decisions and choose people you believe will carry out your wishes. You'll need to make important choices about who will see your plans through. After all, you’re trusting them to protect your wealth, yourself and your loved ones.

• Appoint an executor/trustee. This person represents your estate and ensures it's managed properly. If there's no executor, the process of distributing assets and going through probate could be longer and messier—an extra stressor that your family and beneficiaries don't need during a difficult time.

• Appoint a financial power of attorney (POA). The POA handles your financial duties if you're not able to do so. If you don't name your own POA, the process of naming one on your behalf can be time-consuming and create family conflict.

• Appoint a health care surrogate/agent. This person makes crucial medical decisions for you in the event you can't. It's not uncommon for big differences of opinion to arise, especially when it comes to critical end-of-life choices.

Make Sure Your Financial Paperwork Is Current

Has your family changed or expanded? Have you opened/closed accounts over the years? Are your finances more complicated than they once were? You may want to talk to an estate attorney or financial advisor to ensure your financial and estate planning documents are up-to-date and reflect your current wishes.

• Will and/or trust documentation

• Financial power of attorney appointment

• Beneficiary and transfer on death (T.O.D.) designations for financial accounts and property

• Living will

• Health care directive or proxy

Stay in Control of Your Family's Finances

The lack of a solid plan could result in stress and extra work for your family. But at worst, an incomplete plan could result in the courts controlling how your assets are divided. A family financial plan doesn't have to be a burden. In fact, it may be the best way to protect your loved ones and ensure your legacy lives on.