Wealth Planning Family with Children

June 17, 2020

How to Bring Your Children Into Wealth Planning Meetings

Because many wealthy people in the United States are self-made and didn't inherit anything from their parents, the concept of preparing their own children to inherit wealth never occurs to them, said Paul DeLauro, manager of wealth planning for City National Bank.

However, with the unprecedented financial challenges we are facing, families are forced to consider how to protect what they have and how to pass it down to the next generation.

Heirs must be prepared in advance.

DeLauro recommends if you haven't yet scheduled your first intergenerational meeting, someone on the team, like your wealth planner, can step into the role of “quarterback" to encourage the family to think about the future as it's being shaped today.

“It's up to that quarterback to tell the parents that they have a duty of stewardship to teach their kids how to manage an inheritance," said DeLauro.

Joline Godfrey, author of Raising Financially Fit Kids and founder of The Unexpected Table, a real and virtual gathering place for exploring issues of thriving families, couldn't agree more.

“If the second generation doesn't understand the details of their inheritance, they may be afraid of the responsibility. On the flip side, they may fantasize that there is way more money than you're admitting," Godfrey said.

Now is the time to reset expectations. Here are five topics that you and your wealth planner can cover that will help achieve understanding.

First, reiterate the family values

Before you get started, introduce the subject of a wealth planner to your children by explaining how he or she works for their parents or grandparents and have a fiduciary responsibility to their clients.

By helping your children perceive this professional as an aid to your family, the meeting offers an opportunity to reinforce the family's values.

“The values come from the family, not the wealth planner, so it's important for the wealth planner to say, 'your family has instructed me' when talking about trusts, savings, cash flow and charitable giving," said Godfrey.

Fundamentally, younger and adult children will respond better to new messages from the wealth planner if they are confirmed by you first.

"If your values are to give generously and save extremely, that's what your wealth planner should discuss, too," said Godfrey.

But remember to let your children speak

Because wealth planners may know very little about the kids or grandkids from previous interactions, this first meeting is an opportune time to have the children share their interests, concerns and priorities before they're asked to make decision that could impact them in adulthood.

In fact, some parents bring their children to the wealth planner's office only when it's time to sign paperwork, said Godfrey, but really you want to give them an opportunity to understand the situation and ask questions about the documents they could be asked to sign beforehand.

“It's best to be mindful of the different responsibilities kids may have as they become adults, and it's important to provide information about the consequences of signing the paperwork they're given," said Godfrey.

Initial meetings are also opportunities in which you and your wealth planner can evaluate how responsible your children may be with money, which later can inform the advice that your wealth planner gives to you.

Any questions?

At some point during the meeting, wealth planners should open the floor to questions, particularly if the children are asked to sign papers.

Still, you can remind your wealth planner that the adults must agree on any answers before they're given.

“Wealth advisors should always say 'good question' but admit it if they don't have an answer to give right away," said Godfrey.

“They may want to suggest talking about that topic in the future, so they have time to find out what the kids are really asking and the reaction of the parents to the questions," she said.

Keep the focus on education

Because a breakdown of financial language helps to prepare kids for future financial responsibilities, you should address baseline financial planning sometime during your first meeting, recommends DeLauro.

“You want your children to understand financial vocabulary," Godfrey agreed, particularly as it relates to your family.

“If there's an expectation that you'll want your kids to have a prenuptial agreement, then bring that into the conversation as early as possible," she said.

In this way, financial decisions remain part of the family practice and are not about the identity of any single individual.

Close with a realistic conversation about the future

Kids need to understand how much money is set aside for them in a trust and the restrictions on how and when they can use the money.

For instance, you may have money that's set aside for their education, whereas other funds are set aside for a down payment on a house.

“You need to be extremely explicit about your plans for the money, so their fantasy doesn't amplify reality," said Godfrey.

At any intergenerational meeting with a wealth planner, and particularly at the first one, the goal is to make sure the kids understand how wealth may be transferred and why.

“Sometimes decisions are made for tax reasons or for asset protection," said DeLauro. “Trusts are meant to protect family members as well as to preserve wealth, so any discussion that can help kids understand that is valuable."

Need to discuss your wealth plan with an advisor and wish to find one? Get in touch with a City National Advisor today.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

City National, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.

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