Often well meaning people make vague financial promises and leave loved ones confused and anxious about their words or actions. This happens between parents and children (young and old), spouses, in-laws and other benefactors/beneficiaries. From 10 years of case work, here are three money personality types that commonly make vague financial commitments:
Intend to keep their word – at least as they understand it. Best Intenders feel a deep sense of financial responsibility toward loved ones, but may not understand the financial or legal issues involved or put off the necessary work to ensure their commitments are kept. They may have grown up in an environment where money wasn’t discussed and have money avoidance issues.
Carrots & Control
May keep their word, but it depends on the behavior of the recipient. The promise is a “carrot” and it’s made to control and dominate. Carrots&Control likely grew up in a “do it or else” environment where money was weaponized and used to manage people in lieu of leadership and encouragement.
Want to appear generous, and the promise may or may not be kept or documented (via estate planning) for a whole host of reasons. They may have grown up in an environment where Money=Bling=Love/Attention and do not like confrontation.
While we can agree that no one is entitled to other’s money per se, when verbal commitments are frequently put forward or you are told that it is “documented” or that the paper work is done, then that entitlement is officially “in play”. What complicates the matter is that the promisor is usually in a position of seniority or control. As such, they may give you the “it’s impolite to ask for details” or “don’t you trust me” vibe which, for the record, is their issue not yours.
Regardless of the personality type, here are two of the most common promises, and how you can gently address this in a constructive manner.
1. “Don’t worry about college, we got it covered.” (or some other major expense that takes serious capital outlay).
Most Frequently Said By: Grandparents and in-laws.
What It Usually Means: “We will do our best to cover the college costs even if I am remembering the cost of college as of 20 years ago.” Or “We will cover the cost of college if nothing catastrophic happens in the meantime.”
How You Can Probe: First, I would always save money for my own children, then there are no surprises. But to understand the intention behind the promise, here’s how you tackle this:
- Establish specific college savings accounts (529s in the US) and have relatives contribute directly to those accounts that are held in trust in the child’s name.
- You can say, “This is an enormous gift given the cost involved in going to college these days. In fact, we went to a financial planner recently and they projected it will cost US$200,000 per child, and we would be deeply grateful for any contribution towards this goal.”
2. “You’ll be taken care of.” or “You won’t have to worry about money.”
We have an avatar for this one: Prince Johannes von Thurn de Taxis who was a billionaire but apparently died with US$500 million in debt, US$40 million of which was a tax bill alone.
Most Frequently Said By: Husbands to dependent wives and parents of children who are inheriting estates.
What It Usually Means: “I will take care of you in a way that makes sense to me, not you.” or “I will do as I wish and you can deal with the fall out.”
How You Can Probe: It may take several conversations to get more transparency. You may also not get all the information but you may at least make headway.
- First, do not sign ANY documents that you have not read or do not understand. Hire a lawyer to interpret the documents if you get any pushback from a spouse (or parent).
- Come from a perspective of wanting to be educated. “You often mention that I will be taken care of, but I would feel less anxious if you explain what you mean by that?” OR “What happens in the event of an emergency and I am left on my own. How will I manage and with what resources?” If the answer to this is, “A lawyer will come and tell you,” then ask who the lawyer is and what role they are playing in estate planning.
- You may have to be vulnerable first and ask for the transparency that you need and you will need to educate yourself if transparency is not offered.
- As you learn about your asset base, build a spreadsheet (or list) of what assets you own, what is in whose name, if there is any liability and how money is being invested on your behalf.
If you are the recipient of vague promises, you need to understand the ramifications of those promises and what your options are if they are not kept. Also keep in mind that a lack of transparency can just mean a lack of knowledge or poor planning skills, not necessarily deceit. Men who are saddled with arcane estate planning issues can feel ashamed to ask the necessary questions, and they may ultimately welcome your input. Work towards trust and transparency using tools like a balance sheet and a cashflow statement and hire the professionals you need to get an opinion when estate planning is involved.
Andrea Kennedy, Author of Own Your Financial Freedom, is a Certified Financial Planner, Associate Estate Planner and Global Investment Advisor, offers coaching and counselling around the fundamentals of investing as well as financial therapy for individuals and couples.