Let’s take Kara’s case, for example. Kara is in her early 40s and, together with her spouse, has around $1.5 million invested for retirement. This includes $750,000 in a Roth IRA that her parents, including her father, Max, helped fund throughout her working life by providing financial support that enabled her to invest her earned income.
Max always encouraged Kara to invest in stocks, but now she wants to shift some of her money into fixed-income assets as she gets closer to relying on her retirement savings. Unfortunately, Max strongly disagrees and wants her to keep the money in the market to grow.
Now, Kara is wondering if she must listen to Max since he funded the account, or if it’s OK to disregard his wishes. It’s a tough situation due to his generosity, but here’s what experts say.
Kara doesn’t have to listen to her parents, but she should understand them
First things first: Kara doesn’t have to listen to Max about what to do with the money.
“Once a gift happens, the money is yours,” David Talley, CFP® and founder of Talley Wealth, told Moneywise. “Your parents don’t have any legal authority over where it goes.”
While Talley said it would be morally wrong not to keep the funds in a Roth IRA at all (and unwise, as it would likely affect Max’s willingness to help in the future), the money is legally Kara’s to use as she wishes.
Of course, simply disregarding her parents’ wishes after they gave her $750K isn’t very nice. But being nice doesn’t mean letting them dictate her plan. It may mean trying to understand where they’re coming from, though.
“Here’s a little insight into the way Boomer parents think,” David Bowers, a family therapist at LifewRx, told Moneywise. “I was talking with the parent of a young adult once, and she commented that this felt like the hardest season of being a parent.”
The challenge stemmed from the continued responsibility she felt for her son, even though she knew intellectually that he was grown, had confidence in him, and knew she had no further authority. And Bowers said other parents felt the same, which may inform Kara’s response to her parents.
“[Try] to get a little bit of a picture of what might be going on inside your parents’ heads — it may have much less to do with their need to be controlling or their lack of belief in you and a whole bunch more to do with an internal sense of ultimate responsibility and fear of them failing you if they don’t ‘help,’” Bowers said.
