A guy named Bob asked me a doozy of an money/ethics question this past weekend. I’m fascinated by this question, mainly because I’m torn as to what the answer is.

Here are the basics

Bob’s grandma died. When she died, she left Bob, his cousin, and his younger brother her house. The three sold the house and got to keep about $50,000 each. A few months later, Bob and his cousin were found to be beneficiaries of a life insurance policy on his grandma that was purchased well before Bob’s brother was born. The life insurance policy was for $47,000. This means that Bob and his cousin each received $23,500. Bob’s brother received nothing, as he was not listed as a beneficiary on the life insurance policy. Bob’s family (mom, dad, and brother) didn’t even know that Bob was the beneficiary of this forgotten life insurance policy.

Bob felt kinda strange about this. He decided the best thing to do was to give his brother about $8,000. That would have reduced Bob’s share to about $15,000. Had Bob’s brother actually been one of three original beneficiaries, then Bob would have only received about $15,000. So Bob decided that he would cut in his brother, and then only take about $15,000. Well, Bob’s brother didn’t seem too excited about being given $8,000. In fact, Bob’s brother called their mom, and then Bob’s mom was mad that Bob wasn’t giving the brother half. She felt that Bob was being selfish. Bob was absolutely dismayed that his generous gesture was dismissed as greedy.

Here are some other factors to consider

• Bob didn’t feel comfortable asking the cousin to cut Bob’s brother an $8,000 check too.
• Bob’s grandma had nearly 24 years to change the beneficiary on her life insurance to Bob’s brother – she chose not to.
• Bob is 31 and his brother is 23.
• Bob’s mom and brother both think Bob is being greedy.

What do you think? Feel free to leave a comment, or simply vote in my poll below.

Pete the Planner, causing awkward moments since 1977.

Whether it’s happened already or not, you will eventually switch roles with your parents. They will look to you for guidance. They will look to you for care. And they may even look to you to help them financially. This is inevitable in one way, shape, or form. I’d be lying if I told you that it isn’t sad. It is sad. And we’re talking about it on this here web log because it can have a serious impact on your financial life.

No one really knows how to retire. Most people have never done it before. So when the time comes to retire, or in other words when it comes time to give up your earned income, many mistakes can be made. People often retire too early, with too many expenses, and without a health care plan in place. But what do you care? You’re in your 20s, 30s, or 40s (if you’re in your 50s and 60s and you read my blog, thank you, and I’m sorry some of my pop culture references are lost on you), so you have your own things going on. You are getting married, having kids, building careers, etc etc. All you generally know about your parents’ financial situation is that it’s probably better than yours. And THIS is where the trouble begins.

We are relative thinkers. We hold ourselves in a certain regard, and anyone that seems to be in a better spot than us, we hold in high regard. It’s kinda odd, but that’s what we do. If someone is relatively more successful than us, then we generally remove the relatively, and simply call them financially successful. This most often occurs with our parents. They generally have more stable jobs, bigger 401(k)s, and they don’t have the same material expenses that the typical young American family has. All this adds up to assuming that are parents will be fine when it comes to retirement. That’s a mistake.

At first, it seems like none of your damn business. But it is. Well, it will be. Unless you gave your parents a flaming bag of poo for Mother’s and Father’s Days, then you will most likely be dealing with their estate when they pass away. You will liquidate their assets, pay their debts, and keep the rest. No matter how much money they have, this process sucks. If your parents are adequately prepared, it sucks. And if your parents aren’t adequately prepared then it REALLY REALLY REALLY sucks. The sooner you have a conversation with your parents about their retirement and estate plans, the less the situation will suck. Remember, it’s still going to suck.

So how exactly are you to say “Hey Pops, I want to make sure everything’s cool when you die”? It’s not as cut and dry as death. You actually want to make sure everything is cool if they live. That’s the whole point. They need planning. They need retirement planning, long term care planning, and estate planning. These are things that you and I generally don’t think about on a daily basis. The best way to bring it up is with a casual “hey, can you walk me through your retirement plans so that I know what my job is?” That will inevitably raise a “huh?” That “huh” is a good thing. It gives you a chance to say something like this:

I’ve been doing a lot of reading on financial stuff recently. I found this really (pick your favorite fawning adjective: smart, funny, handsome, potent, ginger) financial writer named Pete the Planner. He had a post the other day about your parents’ retirement and estate plans. He says that I should know what’s going on so that I can step-up when necessary.

See, that wasn’t that awkward. Make sure that your parent knows how important it is to you to help them. You aren’t doing their planning, you are simply trying to find out what their plans are. And if they don’t have any plans, then badger them until they get it done. It’s at this point in time when you realize you have officially switched roles with your parents. “Get your homework done. Clean your room. Take out the trash. Get your retirement, long term care, and estate planning done so that you don’t leave the entire family hanging.”

Have any questions? I know a potent ginger that may be able to answer them.

A lack of financial literacy is about 15% of the problem. A lack of financial restraint is the remainder of the problem. This site was created to help you with both. What helps with restraint? Motivation. Think of me as your financial Richard Simmons. Wait. I changed my mind. Don’t think of me as Richard Simmons.

Anyway, I’m here to help.