An age-based guide to family wealth discussions

Wealthy clients need to talk about money with their children — but they can’t stick to just one script

An age-based guide to family wealth discussions

While affluent clients may not be comfortable talking about money with their children, it doesn’t pay to be too secretive. While nobody wants to make their children feel entitled, putting off those discussions until the last minute can make wealth transfers difficult. That means an early start can pay dividends — as long as the right strategies are used.

When it comes to tween and teen children, clients need not go into the specifics of the family’s wealth or how it’s invested, according to the Wall Street Journal. When they have the child’s undivided attention, they can say how fortunate the family is to afford vacations, nice clothes, good education, and other valuable things. A discussion of the family history, ideally as a story, would also be helpful, said EMM Wealth Senior Vice President Randy Kaufman.

Once they’ve matured a little, the children may also be included in meetings involving family foundations or donor-advised funds. Kaufman suggested that clients ask their children about the causes they’d like to support. Teens can also get engaged in spending decisions such as where to go on vacation.

“In their 20s, they may begin earning a salary, paying rent and other bills,” the Journal said. This could be a good time to discuss the various assets that make up the family’s wealth, including real estate, income-earning properties, life insurance, and other investments.

At this point, children may be considered mature enough for in-depth discussions about the family’s successful saving and investing decisions. Lou Cannataro, a financial adviser with New York-based Cannataro Park Avenue Financial, said clients can discuss various types of accounts and basic inheritance concepts like wills and trusts.

Clients can generally discuss their plans for the money — retirement plans, causes and advocacies, inheritance plans, and possible financial support for the children. Explaining off-limits expenses, such as risky business ventures or lavish vacations, is also important.

Setting clear expectations is also important, said David Geller, CEO of wealth-management firm JOYN.  Clients need to establish how much support they’re willing to extend to their adult children. They should also avoid undermining their adult children’s financial autonomy by saying they expect a payoff from the money spent on the children’s education, or criticizing what the children do with their own money. “Let them make their own mistakes,” Geller said.

Finally, when the adult children are in their 30s and may be starting families of their own, more specific details about the wealth can be discussed formally. As a prelude, parents can broach the idea of getting the children involved through a personal letter. Alternatively, according to Sunpointe Investments founder and Chief Investment Officer Michael Pompian, they can do so at a relaxed family gathering.

“By the time the 30s come around, it’s almost a mandatory situation where you have to talk to your kids about it or you risk the loss of wealth from generation to generation,” Pompian said.


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