The same advantages that family wealth can provide to children, can also become a major impediment to maturation and productivity. To raise children that are able to understand that they enjoy certain benefits and with those benefits come certain responsibilities, takes a blend of planning, flexibility and continuous communication of values, says the article “How to avoid giving your kids too much money, too soon” from the Dallas Business Journal.
Start by listening to comments from your children that will give you a true picture of how they view money and their relationship to it. Use these comments to ask questions. You know your kids best; what will be an age-appropriate question that could lead to a productive conversation? The theme and message for a 12-year old may be the same as for an 8-year-old, but how the question is framed and what kind of answers you can expect, will be dependent upon their own maturity level.
Many families find that regular meetings with family members, especially when wealth was created by an older or extended family member, will help them to better understand the source of their family’s resources. A look at the hard work, persistence and stewardship of the wealth, along with the civic or social responsibilities that go with it, will help them understand how they fit into the larger family picture.
Those meetings are also a good time to let them understand what your expectations are for them. Do you expect them to go from college directly into the family business, or are they expected to go out into the world on their own, before joining the family business? If they don’t need to work, what role do you expect them to play in the community?
Teaching about stewardship and philanthropy are important lessons for families, where wealth spans generations. Discuss the family’s values and how it approaches philanthropy. One family holds a yearly meeting that focuses on giving. Each member is expected to select a worthwhile charity and present it as a candidate for the family’s generosity. They vote, and the winning group is the recipient of a family gift of the year.
Trusts are often a useful tool in distributing funds in a way that is tailored to specific children’s needs. They can be used to establish a payout schedule to distribute assets at certain ages, or if the child reaches certain milestones, like graduating from college, starting a new job, getting married, etc. This can provide financial security to heirs, while fostering self-reliance and personal growth. They can be used as incentives to accomplish other goals, like passing a drug test or a certain time span of sobriety.
Wealth can be a blessing, but it can also become a negative force. An estate planning attorney who works with high net worth families will be able to design an estate plan that will foster the values and goals of the family, across generations.
Reference: Dallas Business Journal (September 24, 2018) “How to avoid giving your kids too much money, too soon”