Monday, September
6 2010
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Monday, September
6 2010
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Announcing a new acquisition!!
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What's New at Forte for the year 2007 November 2007A - Will Your Kid’s Inheritance Make Her a Monster? Not If You Plan Carefully By Forte News Department The
airwaves are full of cautionary tales of young people with too much money too
soon – wretched excess is in, and responsibility seems, well, pretty boring.
And your last name doesn’t have to be “Hilton” for you to worry. Inheritances,
trust funds and other benefits from hard-earned family fortunes of any size can
affect the children of wealthy individuals in incredibly positive and negative
ways. Most
financial experts, such as Certified Financial Planner™ professionals, will
tell you the best scenarios involve early planning, solid parenting and
complete family involvement from the start.
Here are some suggestions on how to raise a responsible heir: Get advice
early: If you have created a successful business or amassed a fortune working
for a fast-growing employer, it makes sense to sit down with tax, legal and
financial advisors to talk not only about the No. 1 goal of protecting those
assets, but passing them intelligently to the next generation. Because these
conversations should go beyond sensible money and tax management to how these
assets will affect your family’s entire life, one of the first questions you
should ask is, “How do I train my kids to inherit this money?” Also, it’s
critical that you include the unthinkable in your discussion – how your
surviving spouse or designated guardians will continue this stewardship if you
die. You need to make sure your plan is effective particularly if you’re not
there to carry it out. Start basic
money training early: In most households, kids start learning about money and
what it does around age 4 or 5, even if it’s only centered on how to buy a
popsicle. Obviously, your kid might have some idea already that his parents
have money, so you have to strike a balance between the reality of your
fortunate situation and the responsibility training all kids need no matter
what their circumstances. You don’t need to lie about what you have, but when
kids are this young, you’re not anywhere near discussing what they may inherit
when they’re older. It’s not their money anyway. Your job should be to
introduce your kids to chores and a modest allowance to cover essentials,
treats and savings that you’ll agree upon. Then watch closely to see how your
kid is learning these skills. This is the bedrock of how they’ll be handling
money the rest of their lives. Lead by
example: If a kid grows up in a house where parents spend indiscriminately and
settle disputes with the kids with money and toys, chances are the kids will
repeat those patterns as teens and adults. If a kid grows up in a house where
parents set money priorities for themselves, participate in charity and
community service and expect children to do the same, that’s a powerful lesson
about wise choices in time and money for a lifetime. Do a family
mission statement each year: This may get an eye roll from some family members.
But a once-a-year meeting to discuss what’s important in family life is a great
mechanism not only to find out how the entire family is doing with regard to
personal values and goals, but a great way to work in a purposeful wealth
message that expands over time. When children are young, they should be allowed
a vote in how family money is spent for particular luxuries like vacations, and
as they get older, parents can elect to expand their vote in other areas, such
as general investment policies for the family holdings. Involve the
kids in investment and planning: If a child is inheriting wealth at a certain age,
it is entirely fair to bring them into the process of the care and feeding of
that wealth at a significantly earlier age, possibly in their early teens.
Before that, it might be fun for them to buy a particular stock or mutual fund
that they can own jointly with you so they can see how investments perform.
Eventually, you can migrate their attention to their potential inheritance, how
that money is currently invested and what efforts are taken to protect its
principal are essential if they are going to take over responsible management
of those funds someday. Kids need to
understand that wealth needs to be tended to in order to grow – you might even
consider bringing them to meetings with your money managers so they can learn
about the process over time. Raise the
suggestion that wealth should stay invested. Wealthy relatives need to tread
carefully here, because if a young person gets money, they’re going to
understandably want to have some fun with it. But it’s important to teach the
message that a significant part of the inheritance should stay responsibly
invested so the child can address a personal goal (advanced education, starting
a business or their own philanthropy) or have wealth to pass on to their
families. Get them
some independent training: The wealth management industry – including financial
planners – are directing training resources toward younger clients who may come
into considerable fortunes at a later date. It’s to their benefit – they want
to keep that business. But if you are already working with investment experts
whom you trust, why not ask them about training your kids can receive when
you’re not around? As adults, they are going to eventually handle decisions on
their own – it might be wise to continue their learning in an adult environment
where they can take the lead in a discussion. November 2007 — This column is
produced by the Financial Planning Association, the membership organization for
the financial planning community, and is provided by David W. Henion, a local member of FPA. | ||||||||||||||
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