A recent study from Merrill Lynch concluded that investors with at least $250,000 in assets do not talk to their families about money. The main reason stated in the survey was to avoid family conflict. I believe the problem is not just for the so-called “mass affluent”. It extends to all of us. If they conducted as survey of all Baby Boomers I believe the overwhelming majority of us just don’t make finances a family discussion. I also believe that the reasons would be more varied than the “family conflict” reason given by the mass affluent in the Merrill study.

Here are 5 reasons you need to discuss finances with your family:

1. It’s selfish not to. That’s right; there is more at stake than who gets your checking account or 401(k). What about health issues? If you had a stroke tomorrow and couldn’t speak who would make financial decisions for you? Have you looked into Powers of Attorney for Healthcare for example? If not then you are placing a heavy and unnecessary burden on your loved ones.
2. There are people ready to make decisions for you. Probate courts are busy making decisions for families like yours. Why? Because many people don’t even bother to make a will. As a result they die “intestate” (without a will) so the probate court decides how your money and possessions will be split up between your wife and kids and it probably won’t be according to what you wanted. So take care of it while you are alive. Spend a few hundred dollars for a will. Oh, and if you have kids, at the top of your list should be naming guardians for your minor kids. Life has its twists and turns. Don’t take chances.
3. Blood can run cold. It’s funny (or sad) how death can change people. We all have stories of people we know or have heard of fighting over grandma’s famed rolling-pin or mom’s wedding ring. Your kids probably won’t say anything to you while you are alive but once you’re gone, the gloves may come off. Talk about “who gets what” while you are still alive. Better to deal with the potential hurt feelings while you are alive to explain and smooth things over.
4. Your retirement is yours not your kids. It’s OK to explain to your kids that you plan to use the equity in the house to supplement your retirement income, for example, and there may not be a house to leave when you die. Not that you have to explain where every penny is going but clue your family in on your retirement plan and reasoning.
5. You may need them to help out with your retirement plan. I don’t mean you plan to move in with them rather they may need to be a part of your retirement strategy. For example, in order to qualify for Medicaid and keep the family home you might consider a Medicaid Trust. In that situation your home would be deeded to a child to get it out of your estate so it could potentially be used to pay for long-term care expenses under Medicaid. It pays to visit an estate planning attorney to avoid any pitfalls with this strategy. Here’s a good article from the Wall Street Journal on this topic if you are interested.

The Merrill study also showed that families who had conversations around finances were twice as likely to feel prepared in the event of a sudden family emergency. Yes, it can be uncomfortable but the end result will be that you maintain control, something you lose if you die or become incapacitated before you have these discussions and/or make the necessary plans. Keep in mind that it shouldn’t be a one-and-done conversation. Life changes as will your plans. Keep the family updated as well. Avoid surprises and hurt feelings that you may not be around to discuss. Get comfortable with the uncomfortable.

Question: What makes you uncomfortable when it comes to discussing your finances with your family? You can leave a comment here.