Daily Press (Sunday)

Talk about inheritanc­e early


“If parents haven’t brought it up with you, you need to bring it up with them,” said Isabel Barrow, director, financial planning at Edelman Financial Engines, an independen­t financial advisory firm. “We know if you don’t talk about it ahead of time, there are going to be problems.” She said these can include fights between family members, confusion over what to do with the money or even uncertaint­y about where to find the most updated version of a family member’s will.

Barrow suggests raising the topic while the entire family is together at holidays or birthdays when everyone is in a good mood. “That might be an opportunit­y for you just to mention, ‘Hey, I’m doing my financial planning and they suggested I talk to you about your plan,’” she said.

Mitch Mitchell, products counsel with Trust & Will, an online estate planning company, said it can be helpful to tell your parents that you are trying to plan for something that is going to be hard for you. He suggests saying something like, “It would be a gift if you can map this out.”

Respect cultural difference­s

Some cultures and generation­s are less comfortabl­e talking openly about money than others, said Leo Chubinishv­ili, a wealth advisor at Access Wealth in East Hanover, New Jersey. Respecting those difference­s can help prevent unnecessar­y tension and discomfort. “It depends on the cultural setting of your family and how you were brought up,” he said.

While Chubinishv­ili said all families should talk about money in some capacity, some families might take longer to warm up to the subject or might benefit from the help of a financial profession­al leading the conversati­on.

Make sure the money is safe

Another benefit to talking about a potential inheritanc­e with your parents is that it gives you the chance to offer assistance, should they need it. “Every parent should start disclosing assets and accounts to their kids for multiple reasons, but number one, for safety and security,” said Walter Russell, chief executive of Russell and Associates, an investment firm in New Albany, Ohio.

“As parents start aging, they might forget about an account,” Russell said, and seniors are also targets for scam artists. If you know more details about your parents’ finances, then you can more easily notice discrepanc­ies and help keep their money safe.

Plan to spend it wisely

Whether it’s $5,000 or $500,000, an inheritanc­e can open up possibilit­ies that you hadn’t previously considered, like a vacation or dream home. But financial experts recommend first focusing on less exciting financial expenditur­es, such as paying off debt and shoring up savings.

“You can start cleaning up your financial house if you’ve paid off debt and build yourself a good emergency fund with six to 24 months of living expenses,” Barrow said. After that, she suggests thinking about funding your intermedia­te and longer-term goals around housing, cars, education and retirement. She added that using part of an inheritanc­e to celebrate your loved one’s life in some way, whether it’s a trip or nice dinner, can also be a way to honor them.

Don’t bank on it

“The market could turn, the family business could go bankrupt. You don’t want to plan your retirement or entire financial plan on that inheritanc­e,” said Laurie Smith, a partner at Wiss, an accounting and tax firm in New Jersey.

There’s also the possibilit­y that your parents will need that money while they’re still living. “What if 10 to 15 years from now, one of your parents has dementia and needs to go into a nursing home? You’re talking $200,000-plus a year that the parent might need to be using. Or your parent might decide to leave their money to their favorite charity,” Barrow said.

In other words, an inheritanc­e is never guaranteed. That’s why it makes sense to talk with your parents about their plans while continuing to make sure your long-term goals — such as saving for retirement — don’t rely on a windfall, because one may never come.

Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypa­lmer.

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