This article ran in the March 2022 issue of the Traverse City Business News and can be read in its entirety below. Black Walnut Wealth Management contributes articles and is featured in various media outlets.
Building wealth to provide for your family today and for generations to come can take decades of hard work. And, unless you prepare your adult children to handle an inheritance wisely, your efforts and planning to leave a legacy can end up being squandered no matter how much you plan to give them. That’s why it’s important to educate and coach your children about financial matters.
Here are three steps you can take to prepare and empower your adult children to inherit generational wealth and make the most of your bequest.
1. Communicate Your Values
Perhaps the most critical piece in preparing your children to receive an inheritance is communicating your values ― both your financial and moral values. This will provide your children with a road map to navigate future financial decisions in their own lives. For example, if you share your money or time with charitable organizations, let your children know why you give to the organizations that you do.
Keep in mind that these conversations should start as early as possible. It may be difficult for your children to process the fact that you won’t be around one day, and the idea of inheriting wealth and the responsibility that comes with it can feel overwhelming. Because of this, give yourself and your children more than enough time to discuss your long-term expectations. The more prepared they feel going into the situation, the more likely they will succeed.
We have helped clients and their children navigate financial literacy and inheritance conversations. Bringing in an experienced fiduciary financial professional can help keep emotions in check and provide an objective perspective. Our goal is to improve the entire family’s knowledge about wealth so that it can last for generations.
2. Be Open About Your Estate Plans
Many families draw up a will and other estate planning documents and then put them in a drawer or a safe, leaving the details to be discovered by family members after they have passed away. But, failing to discuss the contents of these documents can blindside and, sometimes, hurt your children, especially if the details of their inheritance don’t match their expectations.
A better way to handle this is to be upfront and honest about your estate plans. If you can trust them with the details of your will while you’re still here to listen to their thoughts, it will go a long way in showing your children that you value their opinions and feel confident in their ability to carry the family’s wealth into the next generation.
Not to mention, when reviewed in advance, the documents can still be revisited and changed as needed. This is especially important when it comes to substantial hard assets (such as jewelry, art, and real estate) that are hard to divide evenly and may hold sentimental value. Talk with your children about who may want the items or if it makes sense to liquidate them. These conversations will help limit disputes after you pass away and maintain family harmony.
3. Consider a Trust
If you’re concerned about how your adult children will use their inheritance, or if you’re also leaving money to younger family members such as grandchildren, consider setting up a trust.
A trust can be a wise option even if you’re not wealthy. Trusts can give you the power to pay out an inheritance over time instead of all at once, while an objective third party oversees the remaining assets. A trust can also be tailored to your specific needs and can even contain stipulations regarding how old your child or grandchild must be before they can access the funds, as well as how the money can be spent.
Another consideration: Though many people select family members or friends as trustees, it may be better to designate an institution for this role. An institutional trustee can say “no” with ease, avoiding any tension between family members after you’re gone.
In our practice, we have seen just how difficult this decision can be for our clients. Designating an institution can simplify the decision, as you don’t have to worry about which family member or friend to choose. We recommend you take the time to review all your options to make the best decision for your situation.
Start the Process Now
Regardless of how much money you plan to leave behind, it’s never too early to start preparing your children for the possibility of managing wealth in your absence. With these tips in mind, both you and your adult children can feel more confident and better prepared as you plan for the transfer of generational wealth.
Erickson Braund is the Founder and Chief Financial Officer at Black Walnut Wealth Management. He is a Certified Financial Planner®️ professional and a Chartered Retirement Planning Counselor®️. Eric brings over 20 years of experience working with high net-worth individuals and families, helping them achieve their goals of protecting and growing their wealth for retirement and for generations to come. Because Eric is a CFP®️ professional, he adheres to high ethical standards and engages in at least 30 hours of approved continuing education in the financial industry each year.
Braund is a Northern Michigan native who truly enjoys all that the area offers, including hiking, biking, swimming, skiing, volleyball, and boating. He loves spending time with his family — his wife, Jodi, and his two children — and maintaining a balanced life. To learn more about Eric Braund, connect with him on LinkedIn.
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