For individuals or couples who have been fortunate enough to amass a considerable amount of wealth, the question of how to transfer all or a portion of that wealth to heirs is often a chief concern. However, despite the amount of time a parent may spend contemplating how best to perform a wealth transfer, research indicates that children are rarely part of this important conversation.
A 20-year research study of 2,250 families that was conducted by The Williams Group found the “more than two-thirds of intergenerational wealth transfers fail.” What’s more, the majority of these failed transfers can be traced back to poor communication between parents and a child. The fact is that many well-off parents struggle with how or even whether to discuss matters related to a family’s net worth with a child.
There’s no universal rule as to when or how a parent should start discussions aimed to educate a child about a family’s financial matters. Rather, parents are advised to take cues from a child and to seize teachable opportunities where matters related to spending or making money come up.
In some families, discussions related to finances and financial responsibility may begin when a child is young and begins earning an allowance. In other cases, parents may wait until a child is an adult and well into his or her 30s or 40s. Reasons behind delaying these conversations are often varied and complex and frequently stem from a parent’s general discomfort with discussing financial matters and his or her fears that a child’s work ethic will suffer.
When possible, parents are advised to start wealth transfer conversations early on and to include a child in decisions about how wealth could be transferred. Engaging in open and honest dialog helps both parents and a child better understand each another’s points of view and come to a consensus about how a family’s legacy can best be put to use.
Source: Barron’s, “How to Talk About Family Wealth With the Kids,” Sonia Talati, Nov. 24, 2015
Additional resources provided by the author
For more information, please contact estate planning attorney Regina Kiperman:
Or visit her at her new location:
80 Maiden Lane
New York, NY 10038
This post is made available by the lawyer for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this site you understand that there is no attorney client relationship between you and the lawyer. The post should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. ATTORNEY ADVERTISING.