When Children Should Butt Out of Their Parents' Finances
How many of us financial planners have had the privilege -- or aggravation -- of having a client’s adult children participate in a discussion of the parent's finances?
There are good reasons for an adult child to be involved. A client may be aging or be recently widowed, and well-intentioned children may feel a responsibility to help mom or dad with money matters. And many of us financial planners encourage clients to include family members in important financial discussions, such as long-term care and estate planning.
But bringing the kids into a discussion isn't always a good idea.
For example, let me tell you about a conversation I had with a client and his daughter. During an initially pleasant dinner meeting, it was revealed that dad had given money to the daughter and her husband to help buy some real estate.
The client then demonstrated a concern for fairness that I have seen with most parents: He turned the conversation to possibly reapportioning his estate among his children, taking this gift into account.
It's in situations like this when family conflicts and tensions -- the “mom always liked you best” grievances -- usually become apparent. And this dinner was no exception. My client’s daughter didn’t have children. Like many adult children who are childless, whether or not by choice, they often see gifts go to grandchildren or to other siblings who are struggling to raise their families. Such was the case here. The daughter made it clear that she saw no need to equalize the estate because of the real estate purchase.
Meanwhile, I sensed my client’s uneasiness over the conversation.
Each family has its own own financial history -- its own “financial DNA." Every planner knows that very few things affect relationships in the way that money does. Some families don’t discuss money, but should. Some families fight over money and have severed relationships because of it. And some family members use their money to manipulate and control others. All of this history comes to the table when children and parents sit down together.
How many times have we planners heard something like "It’s dad's money, and we don’t care if we ever get a dime"? Of course adult children are going to say these things -- and most truly are sincere.
But sometimes what the child really means is “I don’t want mom's money -- unless, of course, it’s going to someone else.” That includes, in the child's mind, Brother Tom (he’s such a loser) and Sister Sue (she just spends every dime she gets her hands on).
In reality, however, Brother Tom could be a hard-working guy who sells tires and who stops by to mow mom’s lawn each week during the summer. Sister Sue could be a single mother with two kids struggling to make ends meet after a bad divorce. That may be mom or dad’s point of view as they see their children through different eyes.
I think we should encourage our clients to make financial decisions through those eyes for as long as they are capable -- with no “at-the-table” emotional influence.
Most children truly care about the happiness and well-being of their parents over any inheritance they may -- or may not -- receive. But, even in the loveliest of family relationships, I have sometimes gotten uncomfortable questions about future inheritances or “suggested” gifting strategies that mom or dad might want to “take advantage” of.
My gentle but straightforward response to the next generation is, “It’s not your money yet.” We can never know enough of a family’s personal history -- their financial DNA -- but knowing that we don’t know should cause us to question when to include the adult children of our clients in financial and estate planning discussions.
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Sandy is the founder and CEO of Confiance, based in Cleveland, Ohio. She is a certified financial planner and an accredited domestic partnership advisor specializing in planning for traditional as well as non-traditional relationships. Pamela also currently serves on the national board of the Financial Planning Association.