Whether you worked hard to create your own wealth or you inherited from those who came before, you're undoubtedly interested in how to pass it on to your children in the best way possible. Unfortunately, some high income parents have discovered that leaving large inheritances can backfire and cause more challenges than solutions. To help your family avoid this problem, here are 4 tips for helping your kids manage their future wealth well.
Money is often a taboo subject, especially among those who have more of it. But, being secretive and failing to help your kids know what to expect and how to handle it may make them unprepared to receive the inheritance. Hold family meetings where you discuss how your wealth is managed, how it will be divided, and what you would like to see done with it. And be open to your kids' ideas about their futures even if they're different than yours.
As a family, spend some of those group meetings talking about what your family's values are and how your wealth can be used to further those values. Write down the values and goals everyone has individually and in common. Then work on applying them in your life now. Is philanthropy a shared goal? You may want to set up a charitable foundation and get your kids involved in managing or donating to it. Or, choose charitable organizations together as a group.
Get Kids Involved
Starting at a young age, strive to teach your kids how to set a budget, how to decide between wants and needs, how to invest (both long term and short term), and how to manage debt. Developing good habits and helping them to understand financial concepts will increase their chances of managing their future inheritances better.
Create a Team
You should, of course, already have a wealth management team in place to help with your portfolio. This often includes a lawyer, an accountant, a financial planner, and an investment advisor. Make sure your kids know these individuals and have them accompany you on occasion when you discuss your finances. Feeling like part of a team will help your heirs reach out to these advisors when the time comes and make the transition smoother.
While preparing your children or grandchildren to receive your wealth may require some time and effort now, the benefits everyone will reap in the future will surely make it worthwhile.