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Integrated Wealth Management

Managing Family Wealth: Are Your Kids Up to the Task?

"How do we transfer money to our children without paying hefty taxes?"  This is a common question from parents who wish to safeguard their children's financial future.  Sure, we most likely have answers to this question and your estate planner will come up with many strategies as well.  However, whether the transferred wealth will indeed achieve your goal of taking care of your children is still in question. The key is not the dollar amount your children are given, but whether they are equipped with solid financial literacy that will enable them to intelligently and effectively manage the wealth they receive.  We know that teaching financial literacy is no easy task and many parents may find it frustrating and confusing; so here are a couple books that will provide you some guidance in this area.

Start Young; Be Consistent

"Raising Financially Fit Kids", By Joline Godfrey, published by Ten Speed Press Berkley.

This book is not about money or your income level.  It is a book aimed at helping you teach your children to make ends meet and shepherd wealth.  Godfrey illustrates techniques to be used during the various developmental stages of children: Apprenticeship (age 5-18), Starting out (age 19-30), Taking charge (age 31-50), Looking Ahead (age 51-65), Third Wave (age 66+).

In addition, Godfrey also provides guidelines for raising kids amidst affluence; studies show that these "fortunate" kids are more likely to struggle with identity issues, lack of confidence, loss of future motivation, and may display a lack of concern for or awareness of others.  One of the many ideas she mentioned is to encourage older children to discuss financial decisions with the parents' financial advisor.  The advisor can serve as an objective third-party for the children to go to with financial questions.  This often results in an increasing sense of financial responsibility in children as well as an increased awareness that there are others that can assist them in making wise financial decisions.

Build Intellectual and Human Capacity within the Family

"Family Wealth - Keeping it in the Family - How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations", by James E. Hughes Jr., published by Bloomberg Press.

This book offers theories, tips, and examples on how to keep a family’s wealth together across generations.  Hughes thinks that the key to retaining family wealth centers on building the intellectual and human capacity of each family member so that each can find their own pursuit of happiness.  He offers ideas and thoughts concerning: how to define a 100 year family mission; family rituals to enhance passages from one stage of life to the next and how using a family bank can enhance the family mission.  As an experienced estate attorney, Hughes also discusses the roles and responsibilities of beneficiaries vs. trustees, defines mentoring and explains a method of family governance.

Summary

As advisers, we will apply our expertise and work with your estate planner to design and implement the best wealth transfer strategies for you and your family.  But as these books teach, the odds of your strategy ultimately being successful are greatly enhanced by your continuous efforts to increase your family's financial literacy and communication skills.  May the English proverb "clogs to clogs in just three generations", meaning wealth earned in one generation seldom lasts through the third, never ring true in your family.