Empower Your Heirs to Handle Their Inheritance Responsibly

This article is reprinted with permission from Esq. Wealth Management, Inc.

At EsqWealth, we recognize the paramount importance of guiding our clients through the intricate process of wealth transfer, particularly in light of the impending “great wealth transfer.” Over the next two decades, an astounding $72 trillion will be passed on to younger generations, while an additional $12 trillion will be directed towards charitable causes.[1] With $84 trillion poised to change hands, it presents a remarkable opportunity for future generations. To ensure a seamless transition of wealth, it is crucial to impart financial values that empower heirs to responsibly manage their inheritance while fulfilling your family’s financial legacy.

We invite you to consider the following steps to effectively instill your financial principles within your family, enabling them to flourish as stewards of wealth.

Get clear about your values

Financial values serve as a guide for financial decision-making. Writing a personal financial mission statement can help you and your family establish exactly what your values are and communicate them to future generations.

These values, in turn, help you identify the purpose of family wealth, how to grow and maintain assets, and what types of financial education and tools you believe are necessary to achieve these goals.

Begin by brainstorming a list of values with your family, narrowing the list down to a handful of the most important. From there, address how you will approach them. For example, if one of your values is to cultivate an understanding of the responsibilities that come with wealth, your mission statement might say, “Our family will pursue financial literacy through education and regular meetings to discuss financial decisions.”

Open lines of communication

Set aside a regular time to meet as a family and discuss values surrounding money in person. For example, if giving back is an important value, you may consider using this time to decide which causes you’ll donate to over the coming year.

If it’s challenging to gather the family regularly, consider conducting these meetings virtually or scheduling them during holiday gatherings.

Teach financial literacy

A solid financial education is key to ensuring future generations are good stewards of wealth. Start building healthy financial habits in school-age kids by teaching them financial basics such as saving and how to tell the difference between needs and wants. I recall shopping with my son when he was thirteen. He wanted an expensive jacket that was $20 more than a jacket that served the same purpose. I told him that if he wanted the more expensive jacket, then he could use his allowance money to pay the difference. He chose the jacket that he needed rather than the one he wanted. My daughter, on the other hand, often used her money to buy the things she wanted. Teenagers can also gain knowledge about budgeting, building good credit, and understanding the significance of compounding returns.

When children reach adulthood, consider having them meet with a financial advisor who can cover a variety of topics, from setting up a retirement account to the inner workings of family trusts.

Support this learning by being open about your finances. To foster financial understanding and encourage transparency, perhaps discuss the challenges you faced managing money and the lessons learned along the way. While I did not show my children account balances, we often had discussions about risk/reward, the value of hard work, dedication, and fostering relationships with family and friends.

Model your values

Future generations are more likely to adopt the values you have when they see you modeling them. If you want to leave a legacy of charitable giving that your heirs will continue to uphold, consider making regular donations to causes you care about and invite them to participate. If you want your children and grandchildren to understand the importance of a strong work ethic, talk with them about how you gained the business skills that helped you succeed. My children might tell you they’ve heard my stories too many times, that I started working at eight years old (paper route) and funded my college education by operating my own construction business.

It’s never too late to start

It is never too late to talk with your family about your financial values, your wishes, and the responsibilities of inheriting your estate, but doing so can be uncomfortable. Americans report they would rather talk about politics, religion, and even marital problems before broaching the topic of money.[2] A financial advisor can help facilitate conversations about finances and inheritance between you and younger generations, helping to identify values, set goals, and put a plan into action.

At EsqWealth, we are committed to helping you build a lasting financial legacy for your family. Our experienced team of advisors understands the complexities of wealth transfer and can provide tailored guidance to ensure a seamless transition. By working together, we can help you equip your loved ones with the tools they need to navigate the future confidently and uphold your family’s financial principles for generations to come.

[1] “Cerulli Anticipates $84 Trillion in Wealth Transfers Through 2045.” Cerulli Associates, 20 Jan. 2022, https://www.cerulli.com/press-releases/cerulli-anticipates-84-trillion-in-wealth-transfers-through-2045

[2] “Confronting the Money Taboo.” Capital Group, Dec. 2018. https://www.capitalgroup.com/content/dam/cgc/shared-content/documents/reports/MFGEWP-062-1218O.pdf

The information above is not intended to and should not be construed as specific advice or recommendations for any individual. The opinions voiced are for general information only and are not intended to provide, and should not be relied on for tax, legal, or accounting advice. To discuss specific recommendations for any unique situation, please feel free to contact us.

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