How to Prepare Your Adult Children Financially for Your Eventual Demise

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I recently read of a story about an adult woman who lived at home and did not work. Her aging mother paid her expenses, and after her aging mother passed, the woman lived off of her inheritance. The only problem now is that the money is gone, and she is only steps away from homelessness.

Of course, this example is extreme, but if you are a 20 or 30 something, how many friends do you know who live at home? Do mom and dad help you to pay your bills some months? Do they frequently take you out for dinner and pay for your meal?

If you are an aging parent, do you do these things for your children?

Unlike the 1950s when young Johnny may leave home at 18 and get married by 20 and purchase his own home and be financially independent, today’s adult children may require years to make it on their own financially, which means it is even more important to talk about finances.

If you are the parent who is helping to take care of your adult children financially, you may want to adjust your assets so you can help care for your children even after you are gone.

1. Wait to withdraw from your Roth IRA. A Roth IRA can be passed down to your children when you die, and that money can continue to grow until your own children retire. Then, they can withdraw the money tax free. A Roth IRA is the gift that keeps on giving. (Of course, if you need the money, withdraw it by all means.)

2. Discuss what you will give each child. Although asking your children what they would like to inherit can be awkward, having such a discussion can help avoid any family rifts when you are gone. Let your children know what they will inherit and why. Then, there are no surprises when you are gone.

3. Let your kids know where to find your financial records. Think of all of the documents you have–bank accounts, retirement accounts, insurance accounts, the list goes on and on. How many different passwords and login names do you have? How will your children ever figure this all out if you are gone? Make sure to keep all the documents your children need somewhere secure such as bank safe or in the cloud so they know where to look.

4. Update your beneficiaries. I heard from a lawyer friend that recently a man died and his ex-wife, not his current wife, inherited his life insurance policy simply because the man had forgotten to update his beneficiary. Don’t make this mistake. Every year or two, review your beneficiaries and make sure they are in agreement with your will.

5. Let your children know what your end of life wishes are. If you haven’t yet had The Conversation, let your children know if you prefer any heroic measures to extend your life. Having this discussion can make your children feel more comfortable and can save a good deal of money as extending someone’s life may be expensive without giving a good return on quality of life.

Discussing a time when you will no longer be living is difficult, but doing so can make your passing much easier on your children, and you can feel better knowing you have provided your children with the knowledge they need to wrap up loose ends after your death.

{ 3 comments, please add your thoughts now! }

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3 Responses to “How to Prepare Your Adult Children Financially for Your Eventual Demise”

  1. Jim M says:

    A much needed wake up call to everyone living with outdated estate plans. This has been on my to-do list for a while. Time to update these materials asap.

  2. Shirley says:

    – #2 –
    My parents asked each of us if there was something of theirs that we would particularly like to have someday. When they passed and we were cleaning out the house, we found notes attached under many things, naming the recipient and often explaining the origin of the item. It certainly made things easier and sparked many a conversation.

  3. Pauline says:

    My mum is trying to have that conversation with her parents who wouldn’t prepare anything and seem to live like they’ll never age. It is sad because they have a lovely estate and the state will tax about 50% of that if they don’t optimize it (meaning my mum will have to sell to cover the costs).
    It made her realize that she should be more open financially with her children, which is a good thing.

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