MW Tell your adult children about your wealth - just don't tell them everything

By Morey Stettner

Some parents might be concerned that their children will want more and do less

Warren Buffett recently offered an estate-planning tip to parents: "When your children are mature, have them read your will before you sign it," he wrote.

Buffett, the legendary investor and chairman and CEO of Berkshire Hathaway $(BRK.A)$ $(BRK.B)$, echoes the advice of many financial advisers: Parents should discuss money management and family finances with their adult children.

Ideally, these conversations will minimize conflict and reduce the odds of mistrust and misunderstanding after a parent's death. But parents may wonder if there's a downside to showing their will- and other sensitive documents and account statements - to their children.

"It can be a lot to take in for the kids," said Chris Jauch, a Milwaukee-based adviser. Kids, Jauch observed, can have "a variety of backgrounds" with varying degrees of interest and ability to understand the family's financial holdings.

The challenge for parents is deciding just how much to reveal. Giving an overview of the legacy they want to leave and what they bequeath to their heirs can be hard enough. Adding details - a breakdown of assets, a list of brokerage accounts - might feel like divulging too much information.

"We take the parents' lead on how much they're comfortable disclosing," Jauch said. "There are many ways to bring the kids into the fold, from providing limited detail to full disclosure."

If you're unsure how much to tell your kids, proceed in stages. In a series of family meetings, start by identifying the trusted professionals you've hired (financial adviser, accountant, lawyer, etc.), what types of assets you own (real estate, business interests and other investments) and any trusts you've set up.

Later, you can reveal more details if you think that will benefit your children. They may want to know how much money they stand to inherit.

"There's a danger of overdisclosing everything too early," Jauch warned. "If you do that, it can be a disincentive for them to work" and build careers.

The key for parents is taking proactive steps to address inheritance issues. Even if they're uneasy about explaining their investments and listing most or all of their assets, it's better to proceed incrementally than procrastinate or treat it like a taboo.

If you keep silent, an adverse event can trigger a hurried discussion about where the cash is stashed and who gets it. Examples include parents who suffer a sudden healthcare crisis or face a costly lawsuit.

"A lot of my clients have not disclosed how much they're worth, while others show their balance sheet and net-worth statement to their children," said Abigail Gunderson, a certified financial planner in Houston. "It depends on the children's maturity level and disposition."

To help her clients decide how much to tell their children, Gunderson asks questions such as:

-- How do your children handle their own money?

-- How's their personal life? The status of their marriage? Their career?

-- Do all of your children get along? What's the sibling relationship like?

Even if the answers reassure parents that their children are responsible and receptive to learning the details about their money, other considerations can arise.

"A lot of clients are resistant to telling their children because of privacy," Gunderson said. "They're just not ready to disclose so much."

Parents who list all their assets may also fear that their offspring will request a loan or cash gift. Worse, adult children may resent their parents' prior unwillingness to provide financial support: "You have all this money and you refused to pay for my wedding?!"

"Another concern for parents is once they disclose everything, their child may not want to pay back a loan," Gunderson said. "They may think, 'Mom can afford it.' It can be a disincentive to honor their parent's loan."

Gunderson has experience weighing how much to reveal about her own finances. She has provided a high-level view to her 27-year-old son without getting into the numbers. "He's a young professional, and I've told him we have a donor-advised fund," she said. "I just don't want him to know everything. Maybe when I'm 70 I'll tell him. I'm not ready to disclose yet."

Read on:

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-Morey Stettner

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February 18, 2025 07:50 ET (12:50 GMT)

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