Ep # 45: Breaking The Ice Around Family Finances

Benjamin Haas |

In this episode:

Getting the conversation started - 1:58
Why force yourself to discuss finances with family? - 3:14
Finding common ground - 5:46
Education for the next generation - 8:43
Approaching the conversation as we're all in this together - 12:12
The role Financial Planners can play in the conversation - 13:16



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Full Transcript:

Benjamin Haas  00:03

Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you.  A healthier financial life starts...now! Hey Adam, how are you today?  I'm not going to give you chance to answer that.


Adam Werner  00:36

You were still just going to keep talking so I kept my mouth shut.


Benjamin Haas  00:37



Adam Werner  00:38

Okay, cool. So now we know how this podcast is going to go.


Benjamin Haas  00:43

This is going to be jam packed so I want to give ourselves as much time as we can and I need to start it with a very important question for you. Um, quiz, pop quiz. What's the hardest thing for adults to talk about? Politics, health, dying, family, finances?


Adam Werner  01:04

Sure, all of the above.


Benjamin Haas  01:07

Come on, we're a financial podcast. 44% of people...


Adam Werner  01:10



Benjamin Haas  01:11

Family finances is the hardest thing for them to talk about. I get that like, money's a tricky thing but what I really want to harp on today is why we need to help people force those conversations to a certain degree because avoidance can lead to trouble. I think if there's one thing that we have learned in getting really close with our clients and feeling like we're a part of the family dynamic, not talking about these things really leads to more headaches and there's a way that I think we can help start those conversations. So yeah, let's call it you know, breaking the ice and talking finances with family. Yeah, I told you. I told you, it's jam packed. Let's do it. Where do you want to begin?


Adam Werner  01:58

Oh, man. So when we first started thinking about this as a topic, my mind immediately went to, obviously being the younger generation, thinking of us sharing with older family members. So it's either your parents, grandparents, and trying to get a feel for what they have established and what they have set up. Just to make sure that like you said and this is maybe a little bit biased because this is what we do for a living but just making sure that they kind of have their I’s dotted and their T's crossed. So that like you said, if in the absence of that avoidance is not necessarily a strategy. We've seen enough times where not having things set up in advance can lead to many, many unfriendly dominoes. So even just starting that conversation, I think you have to come from an aspect of empathy and respect and just trying to understand the situation. And just hoping to make things, I was going to say better but assuming they don't have things set up.


Benjamin Haas  03:14

It's funny because you thought about the conversation going up to maybe the generation before us when I was thinking more like the conversations that go down but here's the beauty of that. I think it's still the same theme of whether you talk about these things or not. In a healthy family dynamic, you're all in it together anyway. To your point, if mom and dad need long term care, how are you and maybe your siblings going to help deal with that? If there is some sort of inheritance and nothing's really been worked out, guess what? You're now thrown into figuring that out if mom and dad have not truly documented things or started some sort of conversation on what's important. I mean, how many stories do we know about a sibling that wanted a family heirloom and nothing was discussed? And now these two people haven't talked in 10 years? Loans, joint responsibilities. There’s just so many things that if you don't talk about it, that doesn't mean it gets solved so I think it's really important to find that way to have those conversations because even worse than that, if everybody's thinking about it and you're not discussing it, there is probably some sort of loss of connection. There's a loss of trust there that's just happening, all to avoid what I know will maybe be an awkward conversation.


Adam Werner  04:43

Yeah, I think it's that fear of friction and I certainly know that of not wanting to overstep those potential boundaries and even thinking of the way that you're viewing it from the parents down. If it's adult children, it can still be that even, I mean, I will always be my parents' child. But at a certain point, I have my own kids, I think at a certain point, it becomes a little dicier to try to input or to put on them, hey, here's what you should be doing. Even if it's coming from a place of love and understanding and just wanting the best for somebody, it is still a very tricky conversation to be had and that friction can expand itself. And to your point, it can make the relationship in general, a little less than healthy.


Benjamin Haas  05:46

So I'd start here then. If part of this podcast can now turn into what are the ways that we can help people either start that conversation or hey by the way, maybe we can take some of that off their plate? Start with the common ground. We've seen this usually with inheritances. Maybe if it's business proceeds, I think the stat is something like 70 to 80% of family wealth is lost by the second generation. So I think if you start from the common ground of, hey, maybe we're not comfortable talking about this but the goal is to keep the family wealth which means not all taxable or not all lost to a state law or not all going to some nursing home, then let's start the conversation on what are the things that we can do collectively together to start to avoid some of those things? And that's just in a little education.  Whether the child has the education for the parent, or the parent wants to start to educate the child. The common ground, right there is keeping it in the family through education.


Adam Werner  06:53

Yeah, and I think oftentimes, again, it can go both directions, up and down the generation spectrum. We certainly run across enough individuals that just wouldn't feel confident enough with just the knowledge base to be able to talk through a lot of those things. We do this on a daily basis so we are qualified to have those conversations and see all sides. But that in and of itself can be a roadblock up front of what I don't know what to tell my parents to do if I'm still trying to work it out myself. But I think the number one step is for whoever, just to document, what do you want to have happen? And oftentimes, that's the first domino to fall and that often is usually later in life. When it comes to estate planning, documenting wills, power of attorney, the living health direction, those type of things but beyond that, even just what you said, if it's the family heirloom, or where do we want the house to go? Just documenting that is step number one, I think, at least in my head and then to your point, I think once that's all laid out, get some professionals involved or even just have that first step, have some professionals involved to be able to start to piece these things together. And we can help point out, here's something to think about or to avoid. This is okay, this may need some work and just again, being holistic planners. We can see that whole picture where I think if you're just in it and it's your family, it's hard to see the forest from the trees.


Benjamin Haas  08:43

Yeah, so that was actually my second one and you hit on it well. If the first one is find the common ground, maybe that's education. By the way, same bloodlines, you probably have some of the same traits and values so starting the conversation, hopefully isn't too hard. But yeah, my second was hire professional, not only to maybe take some of it off of you but here's the reality, my kids don't like hearing stuff from me.


Adam Werner  09:05

Mm hmm.


Benjamin Haas  09:06

You could tell them the same exact thing that I would tell them and they'd receive it better from you and I think about that thing that stuck with my parents too. It has a different feel to it if I'm the one making certain suggestions or things. If it was some sort of other professional, maybe it comes from just a different place of care, it doesn't come with any other preconceived notions or any other baggage. So I think there's a role for a professional not only with the education piece but just to be the one communicating it may be really helpful. Let that be the way to break the ice. Okay, I've got a third one. I'll tie right back into it, understand the value that there is in not only taking ownership for your decisions but having like collective accountability. I know it's not comfortable and maybe this is why parents wouldn't want to do this with kids or maybe kids don't want to do this with parents. But we've all had our own experiences where we've seen something that didn't work. Maybe it's something we did, maybe it's a coworker, maybe it's an extended friend, whoever it is. Oftentimes, when we hear people going too far with wanting to give other people education, it's because they've seen something and go, well, that didn't work. So you want to make sure you do it this way or this is the way that you need to do it. I think it's important to talk about these things with families so that people can learn from other people's mistakes.


Adam Werner  10:36

Yeah, that one, we've said that many times. I've heard you say that so many times in meetings. What better way, rather than learn from your own mistakes, learn from someone else's mistakes?


Benjamin Haas  10:48

Yeah, right. That's the way to do it.


Adam Werner  10:52

Ideally, sure.


Benjamin Haas  10:54

And I think about that when we're trying to present new information for I guess, I'm defaulting to parents maybe being stubborn or resistant to certain things in the same way that my kids would be stubborn or resistant to me suggesting something that they've never thought of. Well, what can we do, we can present it in a way that is, here's what worked or hasn't worked based on these set of circumstances, so that does come back to education. But I think learning from others mistakes, ownership accountability is really that third pillar of why these conversations need to happen.


Adam Werner  11:28

Yeah, and I guess it's a similar pitfall with just, you know, planning and financial advice in general is, you know, what may have worked for the family friend or your neighbor or your coworker, may not apply to your family and their situation. We often say financial planning is an individualized process. Not everyone's situation is identical so even learning from someone else's mistakes while that's great, it still has to apply to your situation correctly to have that actually be a correlation.


Benjamin Haas  12:08

Yes, agree wholeheartedly.


Adam Werner  12:10



Benjamin Haas  12:12

Number four, my last one. Um, I don't know, let's share some examples of where there's been power and efficiency, when you have really good teamwork happening between different generations. The first one that pops into my mind comes to really detailed estate planning, you know, where there's different assets. Some assets may be income, taxable, some may not. Hey, there's a family property, maybe there's a second property. The I love you will, I know, we talked about this at nauseum. The I love you will of everything's equal to my kids. Well, now all three of them own a property and by the way, only one of them wants it. So now what do we have to do? We have to go through bill of sale, we have to go through transfer taxes, real estate issues, all where a conversation on the front end might have gone, okay, you're going to receive this, this, and this, and everybody's happier, everything's more efficient, and the lawyers and the government weren't a fourth beneficiary of your estate. You just have to talk about it.


Adam Werner  13:16

That's an awesome one because, yes, we've said it, maybe you just said this and I stopped listening. Fair is not always equal. Equal is not always fair but yes, when it comes down to that type of thing, potentially having that uncomfortable conversation on the front end, far outweighs having to clean up a mess after the fact and use that out to the implications from the IRS, the tax perspective, a state taxes, just all of that doesn't necessarily have to be if you're able to work things out in advance. That's a that's a great one.  We see it with grandparents and 529s. Check out our podcast on that where teamwork, maybe, you know, find some greater efficiencies there. I've been thinking you know more about the questions we get around transferring assets out of parent's name so that the five year look back on clawing back assets from a gifting rule and long-term care and Medicare rules. That’s one that pops up every now and then that takes conversation on the front end and what about private loans right now?  I guess that would be a specific situation but if you think about the interest rate, loan environment not being great, people are switching jobs out of jobs. Maybe you've got mom and dad who are really conservative investors who would be happy to give a well-documented 4%, 5% loan to their kids who can't qualify for one where teamwork worked for everybody. So there's examples where talking money might benefit everyone.  It ultimately comes down to our role as planners is to think ahead and again, just try to perceive some of these things that may be coming down and avoid them. But yes, it's there's far more benefit to being proactive and we've said this before too that the amount of flexibility that you have when you're being proactive versus some of your options potentially being taken away if you're sometime reacting to a situation. As uncomfortable as it may be, it is, in our experience, it is well worth at least starting that process and especially in our instance, including a financial professional, whether that's an attorney, an accountant, certainly us as financial planners to be able to see that whole picture. Let us be that middleman, let us break that ice and be the conduit for that conversation and maybe take some of that friction out of it.


Benjamin Haas  16:06

And just let us know ahead of time, are we playing good cop or bad cop? I need to know.


Adam Werner  16:12

Or we can play both.


Benjamin Haas  16:15

Dibs on good cop.


Adam Werner  16:17



Benjamin Haas  16:17

No. But truly, I think you did say that well. There's certainly a role for us here and more often than not, when we meet our clients for the first time and we ask what's really important to them and they talk about family, you can hear it in their voice, what they care about, what they want to see happen in the future, what they want to make sure is avoided and all of that comes from a really good place. I know the conversation isn't the comfortable part but you gave all those reasons why it's really good to just break that ice because once you break the ice, the conversation will flow and we can absolutely aid in that. I hope this was helpful.


Adam Werner  16:56

I hope so too.


Benjamin Haas  16:59

Thank you for your assistance in the conversation yet again, Adam.


Adam Werner  17:05

My pleasure.


Benjamin Haas  17:06

We'll see you next time.


Adam Werner  17:09



Benjamin Haas  17:16

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you. Consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!

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