The great wealth shift

The average life expectancy for American women is 81 years old, while for American men, 76 (US).[1]  According to McKinsey and Company, by 2030, approximately 30 trillion dollars of wealth will change hands from baby boomers to their heirs, the majority of whom will be women as they outlive men on average by 5 years.[2]  Women stand to gain (and potentially lose) a great deal from this demographic trend and, thus, wealth shift.  As is, it’s important that you get ahead of it:

     ·       Realize that this trend is coming, if not here already.

     ·       Get a better understanding of how this will impact you, your parents, your family, your community.

     ·       Have a heart-to-heart with your parents to gain more clarity around their wishes regarding their health and wealth.                                                               

     ·       Put a plan in-place that recognizes and respects the needs of all key parties involved, foremost being your parents. 

 

Get started by getting clarity 

Personally speaking, I understand how uncomfortable it can be to broach the topic of death and money with one’s parents. Doing so (successfully) requires walking a fine line. When is it too soon or too late to have this discussion with your parents? How do you approach the discussion that’s respectful of their health, wealth and wishes without coming across as though you’re waiting for them to die so you can inherit their assets? Why have this discussion with your parents? 

 

When to have the estate planning discussion with parents? 

Generally speaking, the best time to speak to your parents about their estate planning is when they’re in early retirement (their 60s typically). Reason being, most parents are still physically and mentally able to have this discussion, but are now facing the increasing realities of aging (e.g., aches, pains, increase prescription). Additionally, many (proactive) parents have likely thought about and/or have done financial planning for their retirement. So, sharing relevant details with their adult children will likely feel timely and an extension of their financial planning work. As with most things, however, one size does not fit all. For those with ailing or “late-age” parents (80s), it’s best to have the estate planning discussion sooner vs later. Ultimately, the “right time” is whenever it’s most appropriate for your and your parents’ situation.  

 

How to approach the estate planning discussion with parents? 

Although timing is important, equally critical is your approach. Since estate planning involves talking openly with your parents about two socially taboo topics (death and money), it’s best to try and see it from their perspective: If I can’t take care of myself at some point or die, who will step in and look after me and manage my affairs? For many parents, estate planning is and should be about self-care and then “other care.” With that in mind, consider positioning your discussion with your parents as one where you’d like more details around how you can support them.     

 

Here are some potential questions to ask your parents:  

     ·       Have you thought about what would happen if you become incapacitated or die?    

     ·       If you’re no longer able to speak or make decisions on your behalf, who should do so in your place? 

     ·       Is there anything I can do to help smooth your transition as you age?   

     ·       Do you have legal documents, such as a will, in place that will help ensure that your wishes are carried out accordingly? 

     ·       Would you be willing to either share with me copies of your will and other estate planning documents or let me or your estate executor know where to find them in case of an emergency? 

 

When initiating and having this discussion with your parents, it’s important to keep in mind that doing so means spotlighting their (impending) vulnerability and mortality. As is, be sensitive and consider asking open-ended questions to let them know that they can share with you as much or as little about their plans as they like. This may help preserve your parents’ sense of agency in the situation and, thus, allows them to feel more comfortable sharing their thoughts and wishes.        

 

Why have the estate planning discussion with parents? 

There are a number of emotional, financial and practical reasons for having the estate planning discussion with your parents. Emotionally, it can help provide you and your parents greater peace of mind in knowing that you’re either working towards or have a plan in place should your parents become incapacitated or die. Financially, if your parents are well-do-to, it’s often better that they gift in life versus in death as their money will help you make the most of the savings opportunities still (likely) available to you: 401k, Roth IRA, 529. And, if you’re still quite young (20s and 30s), a small financial gift can become a big bequest if invested and managed well over time. However, if your parents are not well-to-do, then the estate planning discussion will give you both an opportunity to brainstorm options for managing and paying for elderly care. 

Practically speaking, it’s best to discuss and have a plan in place when both parties are still abled mind and body. Successful estate planning requires mutual respect, understanding and eventually execution. As is, it should be done by adults.  

 

Conclusion 

Having the estate planning discussion with aging parents can be uncomfortable, if not difficult, for a number of reasons, foremost being it inverts the parent-and-child relationship. The once caretaker is becoming one who will require caretaking. To successfully transition into these new roles, you and your parents need to have a heart-to-heart around what it means and entails for you as individuals and as a family. But, by taking the time and effort to have this discussion with your parents, you will have demonstrated that you have grown into a thoughtful, capable adult – a testament to your parents’ hardwork and success as parents.