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Preparing Children for Financial Responsibility

It's a balancing act that requires thoughtful planning, flexibility and ongoing communication.

Ensuring that family wealth is a source of advantage and security without being a detriment that impedes maturity, responsibility and productivity is a balancing act that requires thoughtful planning, flexibility and ongoing communication.

 

Candid communication

Listen for comments from your children that give insights on how they view and relate to money. This will give you opportunities to ask questions and have an ongoing dialogue. Knowing your children and their maturity levels will help you in crafting age-appropriate communications about family wealth and, importantly, family values like hard work, wise stewardship and giving back.

 

Have regular family meetings where financial matters are discussed. Particularly in families where wealth was generated in an earlier generation, explain to your children how family wealth was created and maintained. Consistently communicating how hard work, persistence, good stewardship and sound decision-making over many years is instrumental in building and sustaining wealth.

 

Depending on their age and maturity, these meetings are a great time to establish clear expectations with your children about any potential inheritance. Let them know that while you plan to provide for them in your estate plan, they should vigorously pursue goals and plan to establish careers to support themselves.

 

Make sure you discuss your philosophy and values about giving and philanthropy. For example, some families donate 10 percent (or a tithe) of their gross income to a religious institution or other charity. Explain your reasoning behind tithing or any other types of philanthropy that you practice and encourage your kids to follow this example with funds they control themselves. One family successfully instituted an annual family giving project where each member brings forward a worthy initiative and the group votes on where the family funds are donated for the year.

 

Look for opportunities to highlight examples of charitable giving in your community. Encourage children to get involved with a charity they care about, in which they can actively participate. Maybe it’s volunteering at a hospital, thrift store, or home for abused women or children. This can give them an up-close view of the impact their financial generosity has on the lives of those who are less fortunate.

 

Role of trusts

Trusts can be a valuable tool for distributing funds in a way that is specifically tailored to your children’s needs. You can structure trusts with an amazing variety of parameters and conditions.

 

They can be crafted to address narrow concerns, only for medical needs, or for educational expenses, or they can give trustees discretion to determine the best interests of the beneficiary within broad categories like maintenance and support. They can also direct the trustee to consider other resources available before distributing from the trust.

 

Some trusts establish a payout schedule that distribute assets to a child when he or she reaches certain age milestones, smaller payouts early on with larger distributions as the person matures. This can help provide financial security to heirs while allowing periods of self-reliance and personal growth. Trusts can even provide incentives by stipulating that children must complete certain tasks before receiving assets, like finishing college,

 

Creating your legacy

If you have accumulated significant financial assets, you know what a blessing wealth can be. Taking steps now to pass on values like a strong work ethic and charitable giving is a great way to mitigate the potential negative effects of inherited wealth. Carefully structuring your estate plan with your attorney is another key to avoiding the pitfalls of a gift that could potentially do more harm than good.

 

Plan now to set the course for your family’s financial future through regular communication about money and values, taking the time to think through your family’s unique dynamics, and sharing your insights and wishes with your estate planning attorney. It’s your legacy.

 

 

For more information about estate planning, download our free e-book, “Estate Planning: Why It’s Important and How to Get Started.” Or contact Cadence Trust & Asset Management at 214-365-7004 with your estate-planning questions.

 

 

LeeAnn Gatlin joined Cadence in 2018 as a trust and estates officer, bringing more than a decade of fiduciary experience administering a wide variety of personal and court-created trusts. She is a graduate of the University of Texas at Austin.

 

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.



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