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

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