Warren Buffett has famously said that you should “leave your children enough to do anything, but not enough to do nothing.” A recent Accenture study showed that the children of baby boomers will inherit almost $30 trillion over the next three decades, leaving more parents (and grandparents) concerned about how a sudden windfall will affect the next generation.
Experts say the first step in allaying that concern is laying the foundation for responsible money management. Here are some tips about preparing your children for an inheritance:
Lead by example. Boomers who have built a fortune by starting a business know the value of hard work, and should share those values with their children. Sheltering children from the struggles of entrepreneurship leads to unrealistic expectations about work and wealth.
Talk about money. Most of us were brought up to believe talking about money is impolite, but children who stand to inherit a large amount of money need to be prepared to handle the responsibilities that accompany it. We suggest you talk about wealth in terms of values, not just assets. You wouldn’t just hand over the car keys to a teenager who has never been behind the wheel; dumping a large pile of cash on an unprepared child can be equally dangerous.
Give early. You can let your children “test drive” an inheritance by giving them a small amount of money at an early age to see how they handle it. This provides you with an opportunity to deal with any red flags (like blowing it all on an expensive sports car) before they receive the majority of their inheritance.
Involve children in decisions. If it has been your habit to share the wealth by donating to causes you’re passionate about, let your children help you make the decisions about charitable bequests. This is a good way to pass along your values as well as teach them about the importance of stewardship when it comes to wealth management.
If you’d like more guidance on legacy wealth management, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.