Giving children ‘money talk’ to protect family nest egg

Successfully transferring family wealth begins with documenting how your portfolio should be managed

Lisa Shelton

Parents are making it a priority to pass down to their children the knowledge and tools necessary to responsibly handle a significant inheritance. They often feel their children’s values may become distorted by the comforts and benefits that wealth provides if not given the proper guidance. Ultimately, these parents fear the next generation will squander their wealth rather than use it as a tool for positive change.

Generally, the inheritor can feel one of two ways: grounded and financially empowered, or experience a lack of self-esteem and guilt over receiving funds they didn’t work for. However, there are several steps that parents can take to help ensure the wealth they’ve protected will both endure and be used wisely by generations to come. Among these first steps are getting organized and having certain vital documents in place, keeping the lines of communication open with their children and involving them at the start of the financial decision-making process.

Estate planning

Documenting your decisions about how your portfolio should be managed, who will receive your assets and in what manner, are all important factors to take into consideration when drafting a trust or will. Parents who create trusts may find comfort in knowing that their children and grandchildren will benefit from a properly managed inheritance and that their assets will continue to be used in a way that reflects their values.

Communication

Equally as important is communicating the details of your estate plan to your children and periodically revising those documents as circumstances change (e.g., marriages, births, illnesses or a changing economy).

When parents communicate with their children about their values and expectations for the family nest egg, children are more likely to be prepared when they receive it, and may also better understand their parents’ motivations. Likewise, parents are more likely to feel assured that their legacy will live on as their children and other beneficiaries learn to invest money and make contributions to society via philanthropic giving.

Hosting regular family meetings provides a space where your closest loved ones can share both expectations and concerns, discuss issues and reach agreements together. Some families go as far as developing a family “mission statement” that outlines shared family values and determines common objectives. Children should be involved in these processes from an early age.

Financial decision-making

Providing children at an early age with safe, hands-on money management experience teaches them to prioritize and make SMART goals (specific, measurable, achievable, realistic and time-bound). Further, allowing children to participate in decisions regarding investments and philanthropic endeavors instills a sense of responsibility and ownership in the process and decisions that are made. When the time comes, these traits and others may prepare them to manage the family legacy both intelligently and responsibly.

The good news is that the task of transferring wealth from one generation to the next can be eased. Parents may achieve the results they desire, through a multi-generational effort involving collaborative planning and open channels of communication. As business magnate, entrepreneur and philanthropist once said, “…With great wealth comes great responsibility… to give back to society and… to see that those resources are put to work in the best possible way…” – Bill Gates.

The sooner you have “the money talk” with your children, the better it may be for both your and their own future.

Disclaimer:

Getting the Most for Your Family Out of Your Relationship with Morgan Stanley, 2016

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning, charitable giving, philanthropic planning and other legal matters.

If you’d like to learn more, Please contact Lisa Shelton.

The author(s) and/or publication are neither employees of nor affiliated with Morgan Stanley Smith Barney LLC (“Morgan Stanley”). By providing this third party publication, we are not implying an affiliation, sponsorship, endorsement, approval, investigation, verification or monitoring by Morgan Stanley of any information contained in the publication.

The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley.  The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

Article by Contently and provided courtesy of a Morgan Stanley Financial Advisor.

Lisa Shelton may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where she is registered or excluded or exempted from registration, www.ms.com/fa/lowerysheltongroup.

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