Children and the Money Talk

By: Jan Paul C. Ferrer

 

Intergenerational wealth planning is best achieved as a team in order to plan for the things and people you love most. Over the next three decades, we are poised to witness the largest wealth transfer in history as $6 trillion will be passed on to younger family members in the U.S. Are you having the “Money Talk” with your children?

Parents are making it a priority to pass down to their children the knowledge and tools necessary to responsibly handle a signifi cant inheritance. They often feel their children’s values may become distorted by the comforts and benefi ts 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 fi nancially empowered, or experience a lack of self-esteem and guilt over receiving funds they didn’t work for. But 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 fi rst 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 fi nancial 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 fi nd comfort in knowing that their children and grandchildren will benefi t from a properly managed inheritance and that their assets will continue to be used in a way that refl ects 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 benefi ciaries 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 (specifi c, 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 multigenerational 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.

Sources/Disclaimer

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

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affi liates 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 Jan Paul C. Ferrer.

Article by Wealth Management Systems Inc. and provided courtesy of Morgan Stanley Financial Advisor.

The author(s) are not employees of Morgan Stanley Smith Barney LLC (“Morgan Stanley”). The opinions expressed by the authors are solely their own and do not necessarily refl ect 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.

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[Jan Paul Ferrer may only transact business in states where he is registered or excluded or exempted from registration [http://www.morganstanleyfa. com/ferrer. Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Jan Paul Ferrer is not registered or excluded or exempt from registration.

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