Episode 83 – Estate planning with your adult children
As you get older, it’s important your adult children understand your finances, so they’re not left guessing if something happens. DRS team member Adam recently had this conversation and shares important things to cover when planning your estate.
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. So I recently read an article from AARP about why it’s so important to talk with your adult children about your finances. These experts say that as we get older, it’s especially helpful for your kids to understand how things are set up so that if you know something should happen to you, maybe if it was like in a car accident, but especially as we’re aging, as dementia creeps in, all of these things, to have these conversations now. So, to help us explore this, we’ve invited our coworker Adam to the studio today. Welcome, Adam.
Adam
Thanks. It’s good to be here.
Jenny
So, kind of as, like, a little setup for this episode. Adam, I had approached you about this idea of talking with adult children. And you’re in your 50s, with adult children in their 20s. And what was kind of your initial reaction when I brought this up to you?
Adam
Well, I thought that was a good idea because we hadn’t done that. I come from a family that didn’t have money, so there was no talk when I grew up about investments or, you know, what happens if my parents, you know, can’t take care of things? There was no thought of any of that because there really wasn’t anything to take care of, you know, at that point.
So, I thought it was a good idea and decided to go ahead and talk to my kids, or talk to one of my kids anyway. To sort of set her up, in case anything ever happened to me and her mom, she’d be able to take over, pay the bills, do all that kind of stuff.
Jenny
Yeah. And had you set up a will or anything like that before this?
Adam
So, we don’t have an actual will, which I’m sure is a terrible thing. We do have a video that we’ve shared with everyone in our family that basically says what we would like to happen. I know that may not carry legal force, and we should have a will, but essentially, you know, our arrangements are pretty simple. You know, our kids get our things and they share it 50/50, we have two kids. So, there’s not a huge amount there, you know.
Jenny
Yeah. So, we had asked you kind of a few weeks ago to sit down and chat with your kids about some of these points. I also want to mention the article kind of points out three big areas that families should focus on. So it’s kind of this sharing password access that you don’t necessarily have to give your kids the list now, but it’s important that they know where the list is, or at least how to access it.
With all of these password managers that we have nowadays. The second one is having access to key documents like where they are and how to access them, like whether it’s birth certificates, passports, just key documents like that. And then the third one is kind of how you pay your bills, like if they’re paid automatically. If so, from which accounts.
So how did the conversation go with your kids. How did you approach it?
Adam
So, I approached my daughter. We just sat down and I asked her if I could talk to her about it. She said, yes. I’m pretty lucky. My youngest is super responsible. She’s already saving for retirement and she’s 23. She works at a small retail job downtown and she doesn’t make a huge amount of money. But since she lives with us, most of her money is discretionary.
So, she’s putting a bunch aside a month because I told her early on, if you could put aside a couple few hundred dollars a month, you will retire a millionaire. So, she’s already starting that. But what we did is we sat around the table and first we talked about passwords and password managers and that kind of thing.
We wanted to make sure she has our passwords. I have a high degree of trust in my daughter, so I don’t mind. I mean, I certainly understand there may be folks who you know, their kids could do something unusual, and you don’t want to give your passwords away. That’s understandable. But our kid has all of our passwords and that kind of thing.
So, we use a password manager. But we also, during this conversation, decided that what we were going to do too, was download them and put them in a thumb drive and basically have it hidden in our house. So if, for some reason that service goes down or streaming goes down or the internet goes down, I still have everything I need in a place locally.
Jenny
Nice.
Adam
When we talked about where our documents are stored, that’s pretty easy because we have an old-fashioned system. You know, we’ve got an old filing cabinet. And in our garage, and we stack up the files by year, by type. So, when we moved, we got rid of a bunch of old files. But we have files for the last few years.
If she really needed to, she could dig through those. But I think most everything is electronic these days in such a way that she probably wouldn’t have to for much. And then we also use the same insurance company that we use for our life insurance, we use for our house and our car and everything. So it’s sort of a one stop shop.
If anything were to happen to us, she could call the insurance company and they would be able to sort of help with everything she needs.
Jenny
Nice. And then what about you kind of mentioned this. Maybe it’s in your video. Like if there’s any particular, charities that maybe you would want your if you passed that you would want some, some of your funds to support. Did you talk about that at all?
Adam
No, no, we didn’t talk about any charities because we’re not in a position like I would want my kids to have the things that that they can have for me. We don’t have a large amount of money, secreted if we were to pass. So, you know, that’s not really so much of an issue for us. My kids know what I would give to.
So, you know, for example, they might give away one of my guitars to a local school or to a talented musician or something like that. But there’s no secret pot of money that they’re going to give away to somebody and give them a good time.
Jenny
But that’s an important part of it, too, is the assets. You know, like you said, you have a nice guitar collection so that they kind of know where you would wish to have those guitars donated should something happen to you.
Adam
For sure. And we’ve actually even talked before when both of my kids were at the house about just our assets in general, so that there wouldn’t be any conflict. If, you know, when me and my wife were gone, you know, I don’t want my kids to bicker over things. And so we just really talked about it, you know, is there anything any of you really want?
And we talked about and there was nothing that anybody really disagreed about. So it was, you know, I’m hopeful that when the time comes to share our assets, there won’t be any griping or complaining among my kids. I highly doubt it. Again, it’s not like it’s Brewster’s Millions, right? It’s not like there’s $10 million and somebody is going to be really upset because the other person gets the Bentley or anything like that.
So, it’s more realistic. And I think probably close to what a lot of folks are, you know, going through when they talk to their kids.
Jenny
Yeah, I think especially when there’s siblings involved. I know Seth, you’re no, you’re not an only child, you have siblings.
Seth
Two younger brothers.
Jenny
Two younger brothers. Have your parents had any conversations with you about what happens? Between the three of you?
Seth
Yeah. My wife and I went to a meeting with my parents and their financial planner and talked a little bit about this, and part of it was trying to encourage my parents to spend some of the assets they have. They want to give their assets to their kids when they pass away, and trying to help them understand that we don’t need them.
Seth
We’re in a position where they should be taking care of themselves. I know it was really important to them in this conversation to make sure everybody gets equal. And I think that’s really hard. Like Adam, as you were describing with tangible assets like, oh, my parents don’t have guitars. But, you know, if they had, I was thinking like they had a stamp collection or something like, how do you – if one person’s really into that and then the other folks aren’t, how do you divvy that up in a way that feels fair to folks?
And, both my wife and I have had, aunts and uncles and grandparents who have passed away over the last few years and those sorts of things I think are just awkward, maybe not like a lot of anger or pain around that, but just, what’s the right thing to do? And it can sometimes feel awkward, like I can imagine the situation of your kids, Adam like, maybe both of them are, “we don’t want these guitars at all. Like, is it okay to just go sell them?” Like what’s the right, appropriate step? I think it oftentimes becomes a lot of work for whoever is the executor of an estate to sort through all those things. Even when the estate isn’t big. It’s just trying to figure out, like, what do I do with this stuff?
Adam
You brought up a good point. When, my dad’s father died, I remember my dad being super exasperated, by having to go through all that stuff. His dad hadn’t made the plans to go through all that, and so he came back to me immediately, and he’s like, the first thing I’m doing is going through all my stuff so that you know exactly what you’re supposed to do.
And we’ve had those conversations too with my kids. I’ve told my kids, “hey, you know, if that guitar doesn’t bring you joy, sell it.” You know? Perfectly fine, you know, and it’s even a weirder thing. And I don’t know how normal this is, but as I get older, I do think about things like, “before I buy this capital thing, is this something that my kids could use, that they would want?”
You know, literally, lately I’ve fallen in love with the particular sword. I want a sword. Right. It’s not an expensive sword, but I want a sword. And so I ask my daughter, I go, would you ever want a sword? And she’s like, oh heck yes. This is my daughter who goes to Renaissance fairs and makes her costumes and things like that.
She’s like, oh, I would love a sword. So that makes me feel a little bit better about if I want to buy this sword, that I know that somebody else will appreciate it after.
Seth
Yeah. I think what I’ve seen and family members, as they’ve helped other family members settle estates and things like that, it’s to me it always seems like the process is going to take a year, just to go through that whole cycle. And I think, as you were saying, for some folks it can feel like overwhelming at the start.
And trying to figure out what the plan is and the steps and, you know, you it might be six months later and you’re like, oh, I have to file taxes now. And like all of these steps. And I think oftentimes it is motivating to how can I make this as simple as possible for whoever is going to follow me?
And I also my parents have, you know, talked about here’s what the safe deposit box is. Here’s where our checking account is. But I’ve thought about this in terms of just, you know, your own personal finances. If you’re married, like, what do you take care of and what does your spouse take care of? And making sure you have access across those things and at least knowledge of them.
That’s something that’s really important to keep in mind. You know, my wife pays certain bills, I pay certain bills. And how do we keep track of those? If something happens to one of us that the other person, you know, they’re already dealing with a lot of things and then trying to, you know, deal with this. What feels like kind of technical.
Adam
And we go through that, my wife tends to pay all the bills. And so, this was a good exercise to make sure that I had all the passwords. Right? Like I could figure them out, but it’s good to have them. And then our situation is also complicated by, and a lot of state workers might have experienced this.
There was, a vendor for state agencies that let their information out, and a lot of our information was compromised. And so I had to go in and block all of the credit reporting agencies because people are trying to take out credit cards in my name. That’s going to be a real hassle for whoever comes next. Right? Before you do anything, then you have to go back and unlock all these things and know your password and all those other things that you need.
So, we hadn’t done that in a year or two. And frankly, I had forgotten one of the passwords. So we had to call, not Experian it was one of the other ones, and go through the whole rigmarole of what I suspect was some kind of LexisNexis oriented security. You know, where they ask me a whole bunch of questions about my family and stuff like that.
Jenny
Yeah. I’m glad you brought up the idea about the spouse, because then as I was prepping for this episode, I thought about, like, between my husband and I, like, I’m the one who manages our finances. And so I went through and wrote out a list of like, okay, here’s where the accounts are. The Roth IRA is with this account, and then the DCP is with this account.
And just saying, you know, all the passwords are saved on my phone in a password manager. So having those sort of things and then printed it out on a list and then stuck it like in a file folder, you know, where it’s easy to find.
Seth
Yeah. The point Adam made earlier about, you know, everything being electronic. I think it makes some things easier. But it’s like if I get a statement every month or a quarter in the mail, it might remind me like, oh yeah, I forgot I had this investment account or my spouse has passed away like, “oh, that’s right, we had this whatever out there.” It’s hard, you know, and that’s we’ve talked about this in the past, the Department of Revenue that has the…
Jenny
Yes. Claim your cash.
Seth
Yeah. Claim Your Cash, the lost property sort of thing. And trying to, do that. I think that oftentimes happens when people pass away. Trying to figure out where these accounts are or what else is out there. You know, some people have multiple bank accounts and, you know, multiple investment accounts and trying to track all that down and sometimes multiple bills.
Jenny
Yeah, yeah.
Adam
Speaking of which, you all did that episode where you talked about the unclaimed property and I had $50-100 waiting. That reminds me, I need to go claim that. I typed in my own name and it said that, yeah, sure enough, me and my address and age had some money somewhere, so I need to go figure that out.
Jenny
Yeah, a whole separate article…separate story on Adam. Yeah, that was one of the other things that the article had mentioned was talking about reviewing your income sources. And I think this is especially important for folks who are retired and having those conversations with adult children of saying, okay, I have this pension with the state, I have a Roth IRA, I have a this account, this investment account, this is where these are. This is the income that’s coming in and where it’s coming from.
Adam
One thing that this conversation prompted that I, I keep thinking about is I haven’t had this conversation with my parents. The extent of the conversation I’ve had with my parents was last time I visited my dad. He said, “you’re the executor of our estate.” That’s the extent of financial conversations I think I’ve ever had. And at the time I said, well, I would encourage you to make my daughter also an executor in case anything ever happens to me.
If I were incapacitated and someone needed to make a medical decision about me, if it wasn’t my wife, I would want it to be my daughter. So, I also think thinking about contingencies. If the person that you have listed isn’t available, who should be next is a key thing.
Seth
I think that’s a really good point. I think people oftentimes think about their spouse and then but as you age and you’re both getting maybe more challenged and being able to make decisions like, who else in your life is going to be able to help you with this? I think about with my brothers, you know, I’ve seen my parents do this with their own siblings and how they’re helping people navigate some of these challenges.
We have what’s out there, what accounts do you have available? What sort of guaranteed money do you have, and what are you living off of investments? Or what can you expect to be coming in? Yeah, it’s tough to put all of that on the table for somebody.
Adam
And it’s different for each person. You know, my wife has will essentially have one retirement through one agency that she’s worked at for a really long time in another state. And I’ll have little pieces because my career has been in like, you know, ten-year chunks at different places. So, I’ll have a very small private sector retirement, a very small retirement from the state of Oregon and a very small retirement.
Well, who knows how big it will be for the state of Washington. But, it won’t be just one check. So, we’ll have to be tracking all these sources and all that kind of stuff.
Jenny
Yeah. And so, Adam, I know that you’ve had this conversation with your children. What is some advice you would give to another parent who wants to have this conversation?
Adam
I think the first thing I would say is, it’s a really good thing for yourself and your spouse to get ready to have this conversation, because it makes sure that you have your ducks in a row. You know where your files are, you know where your passwords are. You’ve got a list, let’s say, or some procedure of what you pay every month.
So, I think it’s good for yourself if you haven’t done that in a while to do that anyway. For me it’s really easy, our kid lives with us right now. She’s going to school. So, it was just a matter of, you know, asking ahead of time. Hey, do you mind if we sit down and talk about this?
And, you know, it makes her slightly uncomfortable because she doesn’t like the idea of thinking about when me and her mom aren’t here. Right? Like that’s an uncomfortable conversation. And people don’t love to have it. But by the same token, it’s totally reasonable. She understands why, you know, we need that conversation. And, you know, she saw both of my wife’s parents had different levels of dementia and issues like that as they got older.
So, she experienced that and we found out about it through my mom’s or my wife’s mom paying the same bills several times in a month. That is how they found out that she had Alzheimer’s. So, it’s something that they’re aware of. They know it can happen. No one ever thinks anything’s going to happen to them. Right? But you should be prepared, and it doesn’t take much.
You can have a nice little conversation, I think maybe 30 minutes, if that was our conversation. And it was just a good way to say, hey, this is out there. If you need anything, here’s how you find help.
Jenny
I think that’s a good approach to it. It’s saying that it doesn’t have to be this big thing, or you can just take it in chunks to say, hey, you know, start opening up that conversation of, “hey, if anything happens to me, you know, the passwords are on a piece of paper in the top drawer” or something like that.
Adam
Well, and like Seth said, I think even just giving people permission to do what makes them happy if you’re not there, so they don’t feel some attachment to your things or to, you know, whatever material objects you might you might give them just, you know, for at least for me, I don’t, you know, I want them to do what makes them happy.
I don’t want them to feel like, “oh, I got to hang on to that stupid guitar.” You know? If they want to sell it, sell it. If they want to wait ten years and play it, they want to give it to their kid. If they have any kids, great. I think that’s an important conversation to have too.
Seth
It reminds me I forgot about this until we had this conversation. I think my parents tried to have this conversation with me when I was like in my early 20s, and I was like, I don’t want to talk about this. Like, I, I don’t know what any of these words mean that you’re saying I don’t really care. And now I’m at a point where I’ve seen them go through it with other family members.
Like I understand more of the importance of it, but it is like, just as you were saying, Jenny, kind of just little chunks like, okay, be aware of this. How can we add on to it? When’s the right time to talk about it and when does it feel more real? You know, if your child’s buying their first house or moving off on their own, like there might be opportunities to bring that conversation forward, it might not go perfectly the first time. And you just keep, you know, chunking away at it. Yeah.
Jenny
Is there anything else that you’d like to share?
Adam
Well, I think it was a good experience that actually helped bring us a little closer. You know, helped me in my daughter have a real conversation about stuff that’s going to happen. And I think it’s a good thing to have the conversation both for yourself, for your kid, for your family. I think it’s a really good conversation to have, because it will ultimately help your family during the most stressful time they’re going to have. Work out all that stuff ahead of time as easy as you can. It’ll make life easier when it’s tough.
Seth
Absolutely, yeah, it’ll still be tough, but it’ll be a little bit easier. I think that’s a great, great takeaway.
Jenny
Yeah. Well, thank you so much for coming in. We appreciate it.
Adam
Thanks. I love, listening and reading the podcast.
Jenny
Thanks.
[music outro]
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