Holiday gatherings and family reunions offer a unique opportunity to discuss financial matters across generations, as multiple family members are often in one place. These discussions can range from detailing estate strategies and legal preparations to sharing practical financial information. Key topics include sources of income (like Social Security or pensions), methods for paying bills, locations of financial accounts, and secure password storage. It's also crucial to identify a family's team of financial, legal, and tax professionals so that adult children or other family members know whom to contact if needed.
Only about 30% of wealthy families successfully pass on their wealth to the next generation, often due to a lack of communication and trust rather than poor investments. In the U.S., an estimated $124 trillion is projected to be transferred over the next two decades, with Canada expecting over $1 trillion by 2035. Important conversations should also cover beneficiaries for retirement accounts and life insurance, as well as the implications of inherited assets, such as the 10-year withdrawal rule for inherited U.S. retirement accounts which can lead to significant tax burdens.
Financial conversations should be approached empathetically and without judgment. Setting objectives, choosing the right timing (holidays or other milestones), and preparing relevant documents can facilitate these discussions. Families should aim to cover values, an overview of their financial situation, and assign responsibilities. The goal is to encourage open dialogue, potentially involving professional advisors, and end with actionable steps like documenting decisions and scheduling follow-up meetings to keep plans current. Starting these conversations early and regularly can instill good financial habits and knowledge across generations.
