Created: October 24, 2022
Modified: October 24, 2022

Prepare Your Beneficiaries for What’s Next

Hi, I’m Joel Johnson with Johnson Brunetti. Today we’re discussing designating beneficiaries and how to handle assets. This is also important information for those of you who may be designated as beneficiaries in the future. Before we get into this, make sure to subscribe to our channel and hit the bell icon so you get notified every time we upload new retirement planning content. We’ve got all kinds of links to different resources, so subscribing is the best way to stay informed.

When and What Should I Tell my Children?

So, assets and wealth. What does that mean to you? It might be a few dollars you want your kids to have when you’re no longer around or it could be millions. And this is where we start getting into questions like, how do I talk about this with my children? When is the right time? What responsibilities do they have and so on? My wife, Wendy, and I have four boys and we’re currently going through the process of sharing information with them. Our financial picture has changed, so we’ve had to revise our estate plan. This means that we need to have additional conversations with our children about what’s happening.

I want to share my experience with you so you can decide for yourself what is the best course of action to take regarding your children and, if applicable, your elderly parents. Perhaps our way isn’t the right fit for you, and that’s okay! What matters most is that whatever path you choose accounts for everyone’s feelings and needs to be involved.

When it comes to estate planning, when and should I tell my children everything? How much detail should I go into? There are all kinds of different philosophies on this. My opinion is that when your kids are younger, like junior high and high school age, they don’t need to know specifics about the numbers. And I’m not sure you want to get into a deep conversation about death with someone who’s in middle school or high school because that can be pretty traumatic.

I think it is beneficial if your children are aware that you are financially stable. When my eldest son was younger and attending elementary, junior high, and early high school, we were not in the same financial situation as we are now–so naturally, we didn’t have those money conversations as frequently. Our three younger boys knew that we were blessed, and we tried to instill that same value in them. We didn’t have to worry about money as we did 10 years ago, and so they understood that. But we still kept the specifics to ourselves.

My children didn’t understand the value of money until they reached adulthood and entered the workforce. My youngest son, for example, worked his way through college and has now been in the job market for a year. It was only then that he grasped the concept of how to manage finances. Our oldest is 32, and he’s been working for more than 10 years now. So they know about money and its value. We are slowly teaching our kids more detailed information about finance as they grow older and seem to be more interested/mature enough to handle the discussion. When you want to get detailed with them is when they understand money–for example, how much various items cost or after they’ve started earning their own income.

I believe that it is important for children to have at least a basic understanding of money. Where should you begin when discussing such a complex topic with young ones? My wife and I have shared everything with our kids except for exact numbers, but they are aware of the ranges to understand how much we’ve saved. And more importantly, they grasp that we won’t spend all our money before Wendy and I die. In this way, they comprehend the significance and weight of wealth.

They also understand that we do not plan to leave them so they don’t have to work. And I’ll get into that in just a few minutes. But what I think is important, is when you think their financial responsibility should begin, and how much information you feel comfortable sharing. But I would begin to introduce the concept of money and financing gradually.

As a Parent, Where do I Start?

Another consideration for parents, before we get into how this affects your kids, is: do you want other people involved in these conversations? Do you have a trustee, or somebody else in the family who can be relied on to help make decisions? Our children are not the trustees of our estate, so it’s important that they know who is and how to contact them when the time comes. I think they should also know why we chose that person – whether it’s a relative, family member, or financial institution – as it reflects our values.
Now, let’s talk about the adult children for a minute.

What is your Responsibility as a Beneficiary?

As an adult child that’s going to inherit money, houses, or anything else from your family, you have some responsibilities. This is family wealth we’re talking about here—it’s not just a single person’s fortune. And even if it’s not millions of dollars, it still matters. I once heard Shaquille O’Neal give a speech where he said to his kids: “I’m rich and you’re not.” He was trying to stress that the money belonged to him and his wife—this isn’t your money, but at some point it will be, or you will have some kind of access to it. And you need to understand that you are responsible for certain things. I believe that it is your responsibility to understand not only how much money there is, but also your parent’s wishes. What do they value?

It may sound like I am preaching, however in my opinion, if you are an adult child that will inherit money someday- you have a duty. And before you take this the wrong way let me explain; I think you have an ethical and moral responsibility to spend their money in a way that represents their legacy values. And again, maybe you’re offended by that. Maybe you think I’m preaching to you, but it’s something that Wendy and I have discussed. We had to start from scratch and work extremely hard for everything we have. I remember sitting on the steps of our first apartment, wondering if we could afford to go out to dinner that weekend. That’s where we came from—and now we want our kids to understand those same values. It’s okay if your parents didn’t grow up with similar circumstances but try and comprehend their principles anyway. I think it’s a very important responsibility.

Are you a Trustee, Executor of a Will, or a Power of Attorney?

If you’re an adult with siblings, one of you is typically listed as the trustee of a trust or the executor of a will. If you’re the trustee, that means it’s your responsibility to carry out your parents’ wishes in their trust document. A trust is like a rulebook that dictates how money should be divided up and spent (or not spent). Being a trustee is a big deal- you’re responsible for following the set rules, and if you don’t, there are consequences. Not only that, but your parents trusted YOU to do this.

I was my mom and dad’s power of attorney for financial things, which gave me the right to sign their name and make decisions on their behalf, even while they were alive. My brother Jamie had the responsibility of being the power of attorney for health care decisions–a very serious role. It’s important to note that this is different than being a trustee or executor. Power of attorneys are typically assigned when your parents are still living in order to have someone else help with decision-making.

It can be complicated when siblings have to agree on something, especially if it’s a touchy subject like medical care. Someone might want to go through with treatment while someone else might not, and this could create arguments within the family. Having one person in charge of these decisions makes things much easier. For example, when my mom got sick with a brain tumor, we had to decide what kind of interventions to take. Since there was only one person in charge of these decisions, the process went much smoother than it would have otherwise.

Your parents gave you medical power of attorney because they trust you. It’s a huge responsibility, and your siblings should be kept in the loop, but at the end of the day, it’s up to you to make the final call. Ask yourself: am I a power of attorney? A trustee? What responsibilities do I have here as part of my familial duty? Just sitting back is not going to cut it.

A couple of our boys don’t seem to care about money, but we try to include them in conversations about it because we feel like it’s our responsibility to instill our values in them. When you’re lucky enough to have the financial security that we do, it becomes your responsibility to use that privilege wisely.

If giving to charitable causes is important to your parents, you should factor that into their inheritance. How can you get involved in that? It’s so important that you have these conversations while your mom and dad are still able to have them.

I Have my Inheritance. Now What?

Lastly, let’s say your parents have passed away and left you an inheritance or gifted it to you before they died. What do you need to do? Well, in a sense, it does change slightly. I think remembering your parents’ values is crucial. But I also think that now you’re responsible for making decisions based on what YOU believe is best– even if some of those values differ from what your parents believed. So while honoring your parent’s wishes is important, keep in mind that the money or income stream belongs to you now.

If you come into a stream of income or a trust from your parents, you need to take that responsibility and have your own financial plan. This might be a life-altering event for you that changes your whole financial situation in an instant. A financial plan should include how to invest your money and what to do in case something happens to you. Although it’s not pleasant, planning for contingencies is necessary.

If you’re married and this money is in a trust, how do you deal with that? We hate to talk about a potential divorce or remarriage situation, but that might be something that your parents plan for. If they didn’t plan for it, maybe you need to start thinking about that type of thing. Maybe you have a child that exhibits problematic behavior, or your marriage is uncertain. It’s important to understand that now that you’ve inherited assets, you need to have to plan that will address those issues if something happens to you. Some of these subjects are difficult to discuss, but overall this is a positive situation. Whether you are a parent or a child, have the tough conversations. This is important stuff.

Thank you for tuning in today. If you want to stay updated with our future segments, make sure to subscribe and hit the bell icon. That way, you won’t miss any of our great retirement videos! I’m Joel Johnson with Johnson Brunetti– we appreciate your time today.

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