Many families worry what the impact of wealth will have on their children and how and when to communicate about wealth. Each family’s wealth, their heirs, and their balance sheet and the type of assets they own are different. More important, the relationships clients have with their children are unique and quite possibly different with each child. Thus, there is not a one size fits all to these discussions and frankly they should be lifelong discussions.

One of the most important aspects during these discussions is to be clear on what your values are; if the wealth is multi-generational and you have inherited a portion of your current wealth, the values of prior generations should also be discussed.  In the majority of cases, the death of a parent is not the time for the children to find out about their inheritance and wealth transfer.

Below are some highlights to consider when planning for these discussions. 

• The first discussion should always include all of the children at the same time. Thus if the family generally all gathers for a certain holiday, that would be a good time to let them know that you will want to have a discussion with all of them when the family is together.  It is important to consider whether you want to include spouses of your children during this meeting.  Generally, we feel it important to include only the children for this first meeting, however that may not be the case with each family.

• At a minimum, family members should be told where the documents are located, who are the key advisors (lawyers, accountants, financial advisors) and what immediate steps they might need to take if an unexpected death occurs. It is also important for family members to know who your doctors are should there be a medical emergency.  Also critical, is the location of where your assets are located, and where your family members can locate all of your passwords to access accounts on-line in the case of death.

• Many parents express their concerns that “knowledge about the family’s wealth and investment management” will have a negative impact on their children (demotivation) and therefore never have the discussion. Unfortunately, in such cases, parental fears can turn out to be self-fulfilling.  Receiving large distributions with no emotional or financial preparation at most ages will upset a beneficiary’s work habits, sense of purpose, and connections with friends and close relationships.  It may also leave the beneficiary asking “Why didn’t I know about this.”  “Why didn’t my parents trust me enough to talk with me”.  “How am I suppose to handle this out of the blue?” 

• Parents should share their own guiding principles with children.
  • This conversation is important if the parents intend to leave unequal bequests, especially if shared in a loving atmosphere.
  • If there are special arrangements between parents and one or more children, parents must recognize the “truth will out,” and it’s their responsibility, not their children’s,’ to explain why.
• There are certain families who are in a special position so that more (or less) disclosure is advisable.
  • In a family business, succession planning for management and ownership should be seen as a process, not a one-time event
  • The family should set up a forum (for example, a Family Council or Assembly) for open discussion of operational and financial issues, as well as ongoing plans for leadership succession.  It may be important to have the Advisors who established the succession plan attend one or more of these meetings
• Family members who are included in these discussions earlier can become responsible owners and make better decisions, such as whether to keep or sell the business.  
  • When family wealth is significant enough that the parents (or other ancestors) have transferred assets into trusts over which the children (and grandchildren) have “beneficial” ownership, they need to know so they can integrate them into their lives.
  • Less disclosure (especially when entities aren’t in place) may be advisable if it could create harm in the children's lives (such as putting a wedge in an unstable marriage).
  • And of course the child’s mental capacity and emotional maturity are key factors—many children simply won’t be able to handle the information.

Below are a few questions to consider.

There isn’t one right answer to these questions, but ideally they should be based on the parent’s goals and values for their heirs: 

1. What were your experiences with money growing up? What would you like to do differently with your children?
2. What are you preparing your children for? What will being mature and prepared look like to you?
3. What would you like your wealth to provide?
4. What values do you want to instill?
5. Does your estate plan align with your goals and values?
6. How will your estate plan look to your children?
7. What are your expectations? How much control do you want to have and are there strings attached to your gifts?
8. How will your planning decisions feel to your heirs? 

We hope this post has provided you with some tools to think about how and when these important discussions should begin. Your Trust Officer is always available to meet and discuss this topic further with you. 

About Caldwell Trust Company

Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently manages over $800 million in assets for clients throughout the United States. The company offers a full range of fiduciary services to individuals, including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.