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Market and Investment Insights

Sometimes money is the elephant in the room.

Money can be a hard subject to talk about, especially to your family. A lot of Boomers in particular were raised with the idea that it was rude to bring up the subject of money. However, it’s one of the most important conversations you’ll have with your family.

It’s a delicate subject, and one that not too many of us really want to broach. What happens to our money when we die?

If you’re like most of our clients, the topic is an important one. After all, you’ve worked hard to earn money, to save it and to make sure your family has opportunities and financial security. It’s only natural to be concerned about what happens to your money when it passes into the hands of your children or other designates.

It can be valuable peace of mind knowing that your children will have opportunities and financial security. However, generational wealth can be a double-edged sword, leading to difficulty and family dysfunction if your children aren’t primed and ready to receive the financial windfall. Stories abound of people who inherit wealth and lose it quickly because they are ill-equipped to manage it properly.

How do you walk that fine line with your children? How do you share with children the finer things in life –– the things you’ve worked hard to earn, and at the same time teach them to appreciate the things they have and to emulate your work ethic? How do you prevent them from becoming spoiled or entitled?

INVOLVE YOUR CHILDREN EARLY ON

First, let us be clear that we don’t have all the answers. We are seeking at the same time as offering guidance. We are open to dialogue and learning from others as we sense is true for many of our clients. With a good degree of humility, here are some ideas.

A good starting point is to involve your children in family meetings. Include them in discussions around whether to buy a new car or replace the old windows in the back of the house. These conversations can show children the need to make sacrifices and hard choices in life –– a skill that will be important for them in adulthood or when it comes time to inherit your assets.

Some of us grew up close to our parent’s work or businesses. We saw how hard they worked and learned to appreciate their work ethic. That’s not the case with all families. Often a parent’s career is something of a mystery to their children. The wealth that comes with that career can also be a mystery or be taken for granted.

Family meetings go a long way to putting everyone on the same page. It’s important to give children a good sense of just how the money was earned. It often didn’t come as a result of good fortune or because we’re all exemplary human beings. It came because we worked hard, struggled, took risks and learned. Passing on the family ethos on money should be an important focus of these family meetings.

ESTABLISH A MISSION STATEMENT

Family meetings are great way to establish a family mission statement by setting common goals, identifying charitable causes and other strategies that all your family members can get behind.

At the same time family meetings can be a powerful platform for improving the cohesiveness of the family unit and can give older family members a voice in how their own legacy is carried forward. The opportunity exists to teach about generosity and giving. You probably have strong ideas about philanthropy and the kinds of causes you support. Talking about your passions can help to instill a similar sense of philanthropy in them, no matter the dollar amounts involved.

Once they reach a certain age it’s also a good idea to bring them to financial meetings with your advisor. I’ve had clients bring their adult children to meetings. It can be an extremely positive experience. It usually starts off with a few simple questions and often evolves into an in-depth conversation about investing, money management and taxes. These meetings are also the perfect time to enter into discussions your own personal values regarding wealth, investing and philanthropy. This is your opportunity to pass some of those values on to your children.

I’ve found that it can be a two-way learning experience. The conversation often triggers questions or ideas in the parent as well on topics they haven’t considered or may not understand.

Regular meetings can teach children a powerful lesson about money. These meetings also give them an opportunity to meet and get to know your financial team –¬– a group they may need or want to work with in the future.

CONSIDER A LIVING INHERITANCE

There is an alternative to leaving it all behind that has become popular in recent years and it is known as a “living inheritance”. It is the practice of helping children with finances while you are still alive. Establishing a living inheritance can mean anything from paying for education, helping with a new home or car, investing in a business or paying for family vacations. For a young person trying to establish themselves, a living inheritance can be life-changing. For the parent it’s a way of enjoying their money by watching their children use and enjoy it.

There are a number of effective tax strategies that families can take advantage of with a little forethought and pre-planning –– strategies that will allow your children to maximize their inheritance. As your financial advisors, we can serve as a crucial advisory board for your family when it comes to developing an inheritance strategy.

Losing a parent can be a tumultuous and confusing time, often made more difficult by the fact that your children suddenly have to start working with your financial team. Everything can go much smoother if they already know your attorneys, accountants and wealth managers and have worked with them before.

If you haven’t already, will you take the next step and reach out to us to discuss this important topic?

Feel free to connect with one of us to discuss next steps.

 

 

Brent Vandermeer

Brent Vandermeer

Portfolio Manager
CrossPoint Financial | iA Private Wealth™
Managing Partner of CrossPoint Financial
[email protected]

Erin Gendron

Erin Gendron

Investment Advisor & Financial Planner
CrossPoint Financial | iA Private Wealth™
[email protected]

 

James Gilbert

James Gilbert

Associate Investment Advisor
CrossPoint Financial | iA Private Wealth™
[email protected]