Discussing the transfer of wealth from parents to children can be uncomfortable for both parties. Yet by introducing your kids/grandkids to the wealth management process from a young age, affluent families may be able to diminish family tensions later in life and help ensure that the planning tradition passes intact to future generations.
Closing the Communication Gap
Opening the discussion about wealth transfer is a difficult, personal decision that is influenced largely by how wealth holders themselves have been brought up to view money and the responsibilities that come with it. For example, some people may dread that discussing wealth with their kids will lead to feelings of expectation and entitlement. Others may simply desire to control all money issues themselves. Still others with young children may be uncertain about their future wealth and unenthusiastic to discuss it until their children are older and have established how well – or poorly — they deal with money.
Embracing the Planning Process
One strategy that may help families overcome planning concerns is to think about wealth planning not as a one-time exercise, but as a process that you will live with every day — and that you assimilate into children’s lives at a very early age.
For instance, when children are young, you can teach them to divide their allowances into three portions — one for saving, one for spending, and one for giving. Consider matching their giving and saving money and set an example by handling your own money in a similar fashion.
Once children become older, allow them to make their own decisions about how they spend their money, and as difficult as it may be, allow them to live with the consequences of their decisions. As children make the passage to adulthood, gradually involve them in the family business as well as the family’s charitable giving activities.
Developing a Win-Win Solution
Certainly, the more wealth a family has, the more important it becomes to make managing wealth a process, especially if wealth has existed for multiple generations and there are instruments such as family foundations in place. In this way, early involvement helps families prepare heirs for their future role as stewards of the family wealth. It also helps develop the skills and experience needed to manage a family business or wealth plan, while ensuring that such knowledge is shared and passes successfully to the next generation.
Working With a Professional
Working together with your team Wealthnest planning professionals — you will be able to assess your current situation and develop first steps toward employing a plan of action. This communication is not intended to be tax or legal advice and should not be treated as such. Each individual’s situation is different. You should contact your tax and/or legal professional to discuss your personal situation.
Developing generational wealth plans can not only be daunting it can become very emotional if you are interested in looking for assistance in developing an un-emotional and systematic plan to involve and in cooperate your children with your financial plan. Call Wealthnest at 480-699-5275 or schedule online at www.wealthnest.com.