Insights
Periodic insights from our Investment and Private Client Teams on a broad range of investment and advice-related topics
Published by the Private Client Team at KJ Harrison Investors
Given my day-to-day as a wealth advisor, I recognize that conversations about financial matters can be difficult. As a society, we often attach a certain stigma to talking openly and honestly about money. Some consider it to be in poor taste; others find it uncomfortable, as if they are in peril of revealing deep secrets that are best left in the dark; still others avoid it simply because they think it is, for lack of a better phrase, “a drag.” Those who have accumulated or inherited substantial wealth are not immune to such reticence. Indeed, in my experience, I would suggest that a reluctance to talk about money matters, including how an estate will be distributed after one’s death, can often be particularly acute among this group, especially when it comes to interactions between family members.
On some levels, that is understandable. Money is serious business, after all, and talking about it may open the door to hard realities, hurt feelings, disappointment or worry. Most of us want to protect our loved ones from such things, so … we simply don’t talk about it. Add in the context of death—which few of us wish to contemplate, let alone discuss—and the excuses for not talking about it just seem to mount.
Yet here is the reality: in developing effective strategies for family wealth management, particularly estate and legacy planning, communication avoidance is usually not a sound approach. The future emotional well-being and financial security of your spouse, children and other loved ones may depend substantially not only on how well you manage money, but also on how well you communicate your wishes and plans to them—and understand their plans and wishes, as well.
How does one take the worry out of talking about wealth and legacy? One approach, which I favour, is to plan to hold a family wealth conversation (or conversations, ideally) in a relaxed, comfortable setting. In the wrong atmosphere, conversations can easily turn into confrontations. The movies tell us that serious talk about wills and estates and the like should be reserved for wood-panelled boardrooms or dreary lawyer’s offices, but these belong in the trash bin of Hollywood stereotype. Far better, in my view, is an intent-driven but casual conversation in a place you and your family enjoy. Perhaps it’s sitting on the dock or around the dinner table at the family cottage, or while on an annual family vacation to a familiar and cherished destination. With summer approaching, now is a perfect time to start planning such discussions.
After that, of course, comes the hard part: deciding what you will talk about. While it’s important to be comprehensive, there is no need to tackle every issue in one sit-down. Break up the conversation into parts, perhaps discussing your will in Round 1, then on to more general matters and feedback in Round 2, and so on. That will allow time and space for you and your loved ones to think, react and respond. If this is your first opportunity to have such conversations, it will likely be only the beginning of a series of them—a process rather than a onetime event. From a communications perspective, your goal is progress, not perfection. But it’s important to get the conversation started.
In a previous post, my team at KJ Harrison covered some of the financial subjects we feel wealthy parents should discuss with their children. But I recommend that these summertime chats (if that is indeed when you decide to hold them) should include the entire family and address matters that are appropriate to their age and their standing.
A few ideas for your consideration:
- Sync up with your spouse: Life gets busy. The day-to-day operation of a household and a family becomes routine, like second instinct, and communication between spouses can often break down because it is simply not necessary. Yet that leeway should not extend to financial matters.Perhaps as a preliminary to the broader family conversation, begin by revisiting and discussing your legacy goals with your spouse. Make sure nothing has changed in your or your partner’s wishes; if they have, talk about how you will adjust your plans. Do you need a new will? Should you assign new executors or powers of attorney?This is also an opportune time to ensure that you and your spouse know relevant financial details in the event one of you passes. Do you both have your family banking information? Does your spouse know who your lawyer, your banker and your wealth advisor are? Does he or she have their contact information? Do you both know where the keys to the safe deposit boxes are, as well as the passwords to bank and credit card accounts, utility billing services, and so on? Sharing that information now can save the surviving spouse untold inconvenience (and money) after one of you is gone.
- Share your legacy goals with your children: This is where things often get difficult. Children of wealth often have their own expectations about how (and how much) they will inherit, and sometimes those expectations are wildly unrealistic. Once they are old enough to understand—say, in their late teens or early 20s—it is sound practice to let them know what your legacy goals are. Talk to them about how your wealth will be dispersed, paying particular attention to matters that will impact their lives. For instance: Will you be selling your cottage? Do you plan to sell the family home? Do you have plans for special support for your grandchildren, if you have any? Divulge and discuss.
- Talk about how the extended family figures into your plans: The modern family is, well, complicated. Divorce and blended families are now commonplace. According to Statistics Canada, more than a quarter of Canadian spouses (that is, either married or common-law) are in their second or subsequent relationship. Stepchildren and their standing in your legacy plans need to be considered—and shared and discussed with your family to help forestall difficult dynamics and, potentially, broken relationships down the road. In-laws (daughters and sons) should be similarly considered and discussed. The goal is to avoid leaving your family to deal with unpleasant surprises once you have passed.
- It’s not just numbers: While this is not strictly a financial matter (although there are certainly financial implications), these relaxed family meetings are also an opportunity to discuss your wishes for your funeral. For many of us, this is something we would prefer to neither think nor talk about. But not letting your family know runs the risk of disagreement and discord, as well as added stress on your loved ones at a time when they will have many other things to deal with. Death comes for all of us; your family deserves to be prepared.
- Discuss your decisions regarding executors and powers of attorney: Too often, loved ones can be confused and hurt by a family head’s decisions regarding executors (who are designated to discharge a deceased’s will) and powers of attorney for care (charged with making decisions regarding healthcare, among other things, for an individual who can no longer make such decisions) and for property (given similar decision-making authority over financial matters). When these designations come as a surprise, loved ones are sometimes left to wonder, why do they get to make such important decisions rather than me? The tensions that develop can easily become rifts, damaging family dynamics beyond repair.My advice: explain your rationale for your choice of executors and powers of attorney, and be prepared to listen to what your family has to say about it. They might even change your mind—a possibility that can occur only if you discuss the issue before it’s too late.
That last point suggests my final piece of advice: When having the wealth and legacy conversation with family members, make every effort to actively listen. Probe them for their thoughts and feelings about your plans, and be open to at least considering changes to better address their wishes. If you do alter your plans, let them know (perhaps at next summer’s family wealth meeting?).
Ultimately, there should be no secrets and no surprises. A successful legacy plan is not a document that stays hermetically sealed in your estate lawyer’s safe until your passing. Rather, it is a process that involves and engages every member of the family. And it all begins with the courage to have a conversation.
