When it comes to estate planning, most people recognize the potential risks of giving too much, too quickly to the next generation. However, this begs the question, how can parents and grandparents teach their children and grandchildren to be good stewards of their inherited wealth? How do they encourage hard work, productivity, and charitable giving? Taking the time to prepare the next generation through open communication, financial education, planned charitable giving, and the strategic transfer of financial responsibilities can help ensure your loved ones have a genuine understanding of the values that have helped to create the family legacy.
Common goals parents have for the next generation include raising children who are good stewards and who know the value of hard work. To achieve these goals, families are encouraged to involve and educate younger generations in the family’s financial affairs. This begins with discussing family investments, debts, and financial history. Typically, the more knowledgeable and involved heirs are with the family’s finances, the more inclined they will be to protect and cherish the family legacy. In addition, it is important to find small ways to involve children in financial decisions and to discuss the concepts of spending, saving, giving, opportunity cost, and investing.
Talk to your family about your estate plans—doing so allows family members the chance to understand, appreciate, and support those decisions now and later after you’re gone. The conversation does not need to focus solely on money, but on your intent. Often, it is more important to explain why you have made certain decisions in your estate planning strategy than breaking down exactly how much money each family member will inherit. If you plan to establish a trust, your family member(s) will also need to learn how a trust works, the responsibilities of being a beneficiary, the role of a trustee, and where an investment advisor fits in.
Parents should consider the values they wish to pass down to the next generation as well. One way to initiate these discussions is to share the family’s history and uphold family traditions. In addition, many families hold regular meetings with all generations to share how the family is using its resources. For example, what are the family’s philanthropic goals? How are those goals a reflection of the family’s values? Involving kids in charitable efforts can ensure that the family wealth will continue to make a meaningful impact. Many families often create and live by a mission statement which guides their collective values and goals.
Finally, the older generation should seek to encourage the passions and interests of the next generation. Individual passions and interests give young people avenues for personal and professional development that can help lead to a more fulfilling and interesting life. Encouraging these pursuits can strengthen bonds between generations. Put simply, a child is more likely to carry on the family legacy if a strong relationship has been cultivated and they feel their family is supportive of his or her individual goals and endeavors.
Along with a family’s team of professional advisors, Cumberland Trust assists in educating younger generations in order to ensure the family legacy continues. It is important to consult an estate planning professional who can help you develop a strategy for your estate plan that is right for you and your family.