For some parents, it can be difficult to discuss family wealth with their kids. You may worry that when your child learns they’re going to inherit a chunk of money, they’ll drop out of college and devote all their time to their tan.
Kiplinger’s recent article, “To Prepare Your Heirs for Future Wealth, Don’t Hide the Truth,” says that some parents have lived through many obstacles themselves. Therefore, they may try to find a middle road between keeping their kids in the dark and telling them too early and without the proper planning. However, this is missing one critical element, which is the role children want to play in creating their own futures.
In addition to the finer points of estate planning and tax planning, another crucial part of successfully transferring wealth is open, honest, and consistent communication between parents and their children. This can be valuable on many levels, including having heirs learn about, understand, and see the family vision while also bolstering personal relationships between parents and children through trust, honesty and vulnerability.
For example, if the parents had inherited a $25 million estate and their kids would be the primary beneficiaries of their own estate, transparency would be of the utmost importance. While that inheritance might lead the children to believe that they could use all this money for their own plans, careers, and dreams, that might not be the case if the parents had other intentions for this inheritance, such as a charity or a comfortable retirement. This lack of communication might impact the way kids plan for their own futures, whereas an upfront family discussion about how the money would or would not be used for the children’s lives would have equipped the children to plan appropriately for their own futures.
Without having conversations with parents about the family’s wealth and how it will be distributed, the support a child gets now and what they may receive in the future may be far different than what they originally thought. With this information, the child could make informed decisions about their future education and how they would live.
Heirs can have a wide variety of motivations to understand their family’s wealth and what they stand to inherit. However, most concern planning for their future. As a child matures and begins to assume greater responsibility, parents should identify opportunities to keep them informed and to learn about their children’s aspirations, and what they want to accomplish.
The best way to find out about an heir’s motivation is simply to talk to them about it.
Reference: Kiplinger (May 22, 2019) “To Prepare Your Heirs for Future Wealth, Don’t Hide the Truth”